Super-deduction AIA – super savings on assets for 2021
The Chancellor introduced a new Super-deduction Annual Investment Allowance in the March 2021 Spring Budget.
Super-deduction Annual Investment Allowance
All (new) plant and machinery purchases (including commercial vehicles) will qualify and will allow you to offset 130% of the asset value against your taxable profit in that first year.
- Let’s say the value of the asset is £100,000
- You can offset 130% (£130,000) against your taxable profit
- At the current Corporation Tax rate (19%), this equates to a tax saving of £24,700
- Sum: £100,000 x 130% x 19% = £24,700
This is a real incentive for you to commit to new investment. This incentive runs from Thursday 1st April 2021 for two years. There is no limit on purchases, and it applies to HP, loans and cash transactions.
Annual Investment Allowance
Also included in the Budget is a £1m AIA limit that businesses can utilise for (used) assets, but this is only currently available until 31st December 2021.
The same principle applies as the example above, but with used asset purchases 100% can be offset against taxable profit, which on £100,000 equates to a tax saving of £19,000.
- Sum: £100,000 x 100% x 19% = £19,000