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Tax Tip - Annual Investment Allowance temporary limit

The temporary Annual Investment Allowance (AIA) limit of £1 million will continue to apply until 31 December 2021 – one year later than originally planned. It will revert to its permanent level of £200,000 from 1 January 2022.

When planning capital expenditure projects, businesses are advised to be mindful of the changes to the AIA limit.

It should also be noted that transitional rules apply where the accounting period spans 31 December 2021. The transitional rules not only determine the amount of the AIA limit for the period; they also place a cap on the amount of expenditure that can qualify for the AIA where this is incurred on or after 1 January 2022 and before the end of the accounting period. This rule can operate harshly, denying the AIA for expenditure where it is within the limit for the accounting period as a whole.

Consequently, the timing of the expenditure can be critical.

We can help you plan your capital expenditure to benefit from the temporary increase in the AIA rules.


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