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Annual Investment Allowance Tips

Business people group.

What is the Annual Investment Allowance (AIA)?

The AIA was introduced in 2008. It is an allowance for tools and equipment meaning a business can write off 100% of qualifying capital expenditure (up to a set limit – currently £500,000) against taxable profits for the same period. (Expenditure over the limit is subject to the normal writing down allowances of 18 or 8 %.)

AIA is an incentive for businesses to invest because it accelerates the tax relief available, so it can all be claimed in the year of investment, rather than over a number of years, helping a business’s cash flow.

It also simplifies tax. The majority of UK businesses have qualifying expenditure less than £500,000, so they can just write this off and don’t have to make writing down allowance calculations every year.

What is the limit for AIA?

From April 2014 to 31 December 2015 AIA has been set at £500,000 per year.

From 1 January 2016 it will return to £25,000 per year.

E.g. If for the period 1 April 2014 to 31 March 2015 your taxable profits are £1,000,000 and you have spent £450,000 on qualifying capital expenditure, you can write that full amount off against your taxable profits and taxable profits will be £550,000.

Who can claim AIA?

AIA is available for companies, individuals and partnerships, where all the members are individuals.

What kind of expenditure does it cover?

It’s available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers. It does not apply to cars.

You can find guidance on claiming AIA in the Capital Allowances Toolkit. This is one of a suite of products designed to help agents avoid errors seen in real returns.

, 25 June 2014

Self Employed Tax Allowances

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Basically when you are self employed you spend money on 3 types of expense:


1. Capital Expenditure – Equipment & Vehicles


2. Business Expenditure – stock, wages, premises


3. Private Expenditure – day to day living expenses – mostly not allowed but some types of cost may still count as business expenses


In general its types 1 and 3 where sole traders and partnerships miss out on tax allowances.


For example, you could claim capital allowances on your car, if you use your car partly for private and partly for business you simply disallow a % for private use.


On other assets there is an Annual Investment Allowance which is currently £250,000 per year from January 2013.


For most business that will cover all their capital expenditure, but there are further allowances available too.


With regard to private expenditure, there are tax reliefs available for working from home


If you have to spend money on tools or specialist clothing for your job you may be entitled to either:


  • tax relief for the actual amounts you spend
  • a ‘flat rate deduction’


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