Two key measures the UK government has introduced to stimulate business investment and growth are Full Expensing (FE) and Annual Investment Allowance (AIA). These initiatives provide substantial tax benefits to those driving investment and development in their business.
The Full Expensing scheme, which replaced the previous Super Deduction, was made permanent in the Autumn Statement 2023.
In this scheme businesses subject to corporation tax can make a tax saving of 25p for every £1 invested on main rate assets.
Businesses can use FE to deduct the cost of certain plant and machinery from their profits before tax straight away, rather than slowly over the life of the asset.
Within FE, the assets bought must be new and unused. If you are looking to invest in second hand assets this can still qualify under the Annual Investment Allowance (AIA).
AIA is available for all businesses including unincorporated businesses and most partnerships. It provides 100% first year tax relief for plant and machinery investments up to £1 million.
In previous years the AIA amount has fluctuated but for investments made from 1st April 2023 it was permanently set at £1 million.
As mentioned above one of the benefits of the AIA is that it can be used for both new and second hand assets.
You can find more guidance on FE and AIA here:
Please note: this article doesn’t provide investment, financial or tax advice. It is an illustrative example. Please speak to your own company tax advisor.