The Government sets a limit dictating how much Anual Investment Allowance (AIA) a business can claim each year. In January 2019 the rate of AIA was set at £1,000,000 and this change is in place permanently according to the Government, however, as with most taxable thresholds they could be reviewed again in the future with the claimable amount increasing or decreasing in line with the in-power Government policy.
AIA is a type of Capital Allowance and is a way to claim relief on many assets your business owns.
You can claim AIA on most plant and machinery items up to the AIA threshold listed above.
You can not claim Annual Investment Allowance on any items given to your business, items you owned before you started using them in your business or on business cars. If you have any items falling into these categories, you should utilise the writing-down allowance instead. (Scroll down for more info on Writing Down Allowance WDA)
Changes to the Anual Investment Allowance
| AIA | Sole traders/partnerships | Limited companies |
|---|---|---|
| £1 million | 1 January 2019 – 31 March 2023 | 1 January 2019 – 31 March 2023 |
| £200,000 | 1 January 2016 – 31 December 2018 | 1 January 2016 – 31 December 2018 |
| £500,000 | 6 April 2014 – 31 December 2015 | 1 April 2014 – 31 December 2015 |
| £250,000 | 1 January 2013 – 5 April 2014 | 1 January 2013 – 31 March 2014 |
| £25,000 | 6 April 2012 – 31 December 2012 | 1 April 2012 – 31 December 2012 |
| £100,000 | 6 April 2010 – 5 April 2012 | 1 April 2010 – 31 March 2012 |
| £50,000 | 6 April 2008 – 5 April 2010 | 1 April 2008 – 31 March 2010 |
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When can you claim AIA?
You are only able to claim for items purchased in the period for which you are claiming.
There are a couple of considerations here, as the date the claim is filed could change.
The date you bought it is:
- when you signed the contract if payment is due within less than 4 months
- when payment’s due if it’s due more than 4 months later
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Items you use outside of your business
It is not allowed to claim AIA against items used outside of your business when you are a partnership or sole trader.
In instances such as these, you would reduce the capital allowance claim by the amount you use the asset outside of your normal business operations.
With Annual Investment Allowance, be aware that you may have to pay tax on items that you sell after claiming AIA on it.
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Writing Down Allowance
Writing-down allowance can be used where the asset is not eligible for AIA such as cars or perhaps where AIA is not available as the allowance has already been utilised.
The writing down allowance is 18% for items in the main pool. The allowance is based on a reduced balance calculation.