Temporary AIA limit extended until 31 December 2021

The Annual Investment Allowance (AIA) enables a business which incurs qualifying expenditure to claim an immediate deduction when computing taxable profits. The deduction is capped at the amount of the AIA limit for the period which remains available. The AIA limit was increased from its permanent level of £200,000 to a temporary level of £1 million from 1 January 2019 to 31 December 2020. The Government have announced that the £1 million limit will apply for a further year – until 31 December 2021 – to help businesses to recover from the COVID-19 pandemic.

Impact on the transitional rules

The extension of the £1 million limit for a further year means that the transitional rules, which originally would have applied where the accounting period spanned 31 December 2020, will now apply where the accounting period spans 31 December 2021.

If your accounting period falls wholly within the period from 1 January 2019 to 31 December 2021, your AIA limit for the period is £1 million.

Speak to us

Talk to us when planning your capital expenditure projects to find out how the timing can impact on the capital allowances available.