The temporary Annual Investment Allowance (AIA) will be extended until 01 January 2022 to “stimulate investment in UK manufacturing”, it has been announced.
The measure – which increases the allowance from £200,000 to £1 million – was due to end in January 2021.
According to HM Revenue & Customs (HMRC), businesses across the country can continue to claim up to £1 million in same-year tax relief through the (AIA) for capital investments in plant and machinery assets until at least January 2022.
Commenting on the extension, Financial Secretary to the Treasury Jesse Norman said: “It is vital that we support business through the difficult months ahead.
“Extending the Annual Investment Allowance’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.”
Annual Investment Allowance: how does it work?
Under the relief, businesses can deduct the full value of an item that qualifies for AIA from their profits before tax. This includes most plant and machinery, but not cars, items you owned for another reason before you started using them in your business or items given to you or your business.
The allowance was increased from £200,000 to £1 million on 01 January 2019 to stimulate and encourage investment.