Super-deduction AIA – Super savings on assets for 2021

Super-deduction Annual Investment Allowance

The Chancellor introduced a new Super-deduction Annual Investment Allowance in the March 2021 Spring Budget. All (new) plant and machinery purchases (including commercial vehicles) will qualify and will allow the client to offset 130% of the asset value against their taxable profit in that first year.

Example purchases:

• Let’s say the value of the asset is £25,000
• The client can offset 130% (£130,000) against their taxable profit
• At the current Corporation Tax rate (19%), this equates to a tax saving of £24,700
• Sum: £25,000 x 130% x 19% = £6,175
• Let’s say the value of the asset is £100,000
• The client can offset 130% (£130,000) against their 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 clients 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.

Example purchase:

The same principle applies as the examples 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: £25,000 x 100% x 19% = £4,750
• Sum: £100,000 x 100% x 19% = £19,000

We can put you in touch with the relevant experts for your next big ‘plant and machinery’ purchase. Now is the perfect time to buy the machinery you may need to help grow your business. Why not request a quotation from any of our product pages or call us on 0121 541 1444 to find out more.

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