Annual Investment Allowance (AIA) £1m cap extended

The Treasury has confirmed the extension of £1 million Annual Investment Allowance (AIA) cap for an additional year. Earlier it was designed to stimulate investment in UK manufacturing.

The government extended AIA for an additional year in an effort to counter the current slump in economic activity.

Now businesses, including manufacturing firms, can continue to claim up to £1m in same-year tax relief through the AIA for capital investments in plant and machinery assets until 1 January 2022.

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The AIA provides a tax write off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.

Initially, the temporary £1 million cap was due to revert to £200,000 on 1 January 2021.

Commenting on the extension, Jesse Norman, Financial Secretary to the Treasury, said:

“It is vital that we support business through the difficult months ahead.”

“Extending the AIA’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.”

The UK government continues to look at ways to stimulate the economy. However, this is yet another short term measure to provide greater certainty to industry.

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