With the cost-of-living crisis beginning to bite, buying expensive machinery and equipment may be low on the list of priorities for many businesses.
Businesses may want to think again, however, thanks to the large tax savings on offer due to current Capital Allowance schemes.
Don’t miss the deadline
Are you interested in exploring this option? Now is a great time to act, as the clock is ticking.
Businesses now have less than 12 months remaining to make full use of the current super-deduction before this temporary Corporation Tax relief ends on 31 March 2023.
What is the offer?
Companies can claim allowances of 130 per cent on most new plant and machinery investments that normally qualify for main rate writing down allowances, which they can use to reduce the Corporation Tax liabilities. This allows companies to cut their tax bill by up to 25p for every £1 they invest.
Incorporated businesses can also claim a first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances.
To benefit from the relief, the assets purchased must be new and not second hand or refurbished equipment.
What about the Annual Investment Allowance?
Unincorporated businesses, such as partnerships and sole traders, can continue to benefit from the Annual Investment Allowance (AIA), which gives a deduction of 100 per cent for qualifying plant or machinery expenditure against a business’s profits up to the threshold of £1 million until 31 March 2023.
After this date the AIA limit falls to £200,000 – so you need to be quick to take full advantage of the higher allowance.
There is less than a year left for businesses to take advantage of these schemes, so it is a good idea for businesses to plan ahead.
If you were planning on spending money on new machinery a year or two from now, it might be worth considering moving this purchase forward to this tax year so you can take advantage of the schemes.
Don’t miss out on these super savings for your business. If you need advice on Capital Allowances, contact our expert team today.
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