Chris Sanger, EY’s Head of Tax Policy, comments on the Annual Investment Allowance (AIA):
“In a Budget that was light on tax incentives for capital investment, there was some welcome news in the form of a further temporary increase in the limit of the annual investment allowance (AIA) from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from 1 January 2022 to 31 March 2023. The AIA, a 100% capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit, has been a feature of the UK legislation since 2016. Its predecessors were nicknamed the yo-yo tax relief, as Chancellors were renowned for increasing and decreasing it to stimulate investment.
“Today the Chancellor has extended the period of the “temporary” relief through to the start of the new 25% rate of corporation tax. Given that much of the expenditure in this period may also be covered by the “super-deduction” announced in the Spring, the cost of the extension is far less than in normal times. Nevertheless, it will be valuable to those purchasing second hand equipment, something excluded from the Chancellor’s incentive in the Spring.”