In the upcoming budget, business owners are getting curious and waiting to see if the Chancellor changes Annual Investment Allowances (AIA).
AIA are Capital Allowances that allow a business to deduct the full value of an asset from their profits. This is before tax, in the financial year of purchase. Annual Investment Allowances are currently set at £200k but have seen fluctuation since 2008, ranging from £25k to £500k. The last time they changed was in January 2016, which saw a reduction from £500k to £200k. They were previously set at higher levels to stimulate business growth especially, in the manufacturing sector. This sector in particular that has a heavy reliance on capital equipment and machinery. For this reason, there is a lot of speculation around possible changes in the upcoming budget.
Even at £200k, the saving for companies spending up to this amount on business assets can be as much as £40k. This is a huge incentive that can massively influence asset buying decisions. It’s important to note that unused AIA cannot carry forward. As a result, many clients are accelerating their buying decisions to ensure they make full use of their AIA.
Equipment, machinery and commercial vehicles qualify for AIA.
Assets financed on hire purchase and loans still qualify, as do cash purchases. Equipment, machinery and commercial vehicles also qualify, but assets that are subject to lease agreements generally do not.
There aren’t many Government incentives for businesses, so it will be interesting to see if AIA are changed by Philip Hammond on Wednesday 8th March.
If you’re considering making the most of AIA and are looking at investing in purchasing new assets, we can support you with the finance. We have access to over 150 lenders and a solid understanding of asset finance. To find out more, call us on 0161 633 2548 or complete our enquiry form.