Changes announced to capital allowances following the ‘mini-budget’

AIA fixed at £1M

The Annual Investment Allowance (AIA) has sat at £200,000 since 1 January 2016 with a temporary increase to £1 million from 1 January 2019. This increased amount was due to end on 31 March 2023 after being extended on a number of occasions to help businesses to invest, particularly during the pandemic. The Chancellor has now announced that AIA will now be permanently set to £1 million.

Corporation tax rate increase cancelled

The corporation tax rate was due to increase to 25% starting 1 April 2023 however, this has now been cancelled and the rate will now remain at 19%.

Super-deduction will be ending 

Super-deduction was an allowance whereby certain asset additions (general pool only), were claimable at a rate of 130%. The rate applied to assets purchased after 1 April 2021. This allowance will still end, as previously legislated, on 31 March 2023.

Introduction of Investment Zones

These Investments Zones will have tax reliefs and other benefits that will encourage rapid development and business investment. To initiate this there will be a 100% first-year enhanced capital allowance relief for plants and machinery used within specific sites. This will be accompanied by Enhanced Structures and Buildings Allowance relief that will give businesses the opportunity to reduce their tax liabilities by 20% per year. Further details on these are still to be announced.

What will these changes to capital allowances mean for those with commercial property interests?

The Government’s plan is to encourage increased investment and give a level of certainty to enable economic growth.  As a result with so many changes taking place,  it is important to rely on expert support to ensure these investments don’t go to waste and ensure that the relevant tax relief is secured correctly.