If you own a business in the UK, understanding capital allowances for plant and machinery can help you manage your finances efficiently. In this article, we’ll explore what capital allowances are, what assets they apply to, and the latest changes in UK tax law that affect businesses following the recent Spring Budget.

What are Capital Allowances?

Capital allowances are a tax relief that businesses can claim on certain assets to reduce their tax bill. They apply to assets like machinery, equipment, and business vehicles such as vans and lorries.

New Capital Allowance Measures for Plant and Machinery

Starting from 1 April 2023 until 31 March 2026, the UK Government is providing a 100% tax deduction for capital expenditure on plant and machinery to encourage investment. This replaces the previous 130% super-deduction for qualifying assets.

The new measures provide a 100% first-year allowance for main-rate expenditure and a 50% first-year allowance for new special rate assets. The amount of funding that can qualify is uncapped, providing businesses with significant tax savings.

Annual Investment Allowance (AIA)

The limit for Annual Investment Allowance (AIA) is increasing from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery. This increase will become permanent from 1 April 2023. The AIA is available to all businesses, including unincorporated businesses and most partnerships.

Promoting Business Growth

Capital allowances for plant and machinery play a crucial role in promoting business growth and economic development. They encourage businesses to invest in new projects and update their operations by providing tax relief on investments in these assets.

By claiming capital allowances, businesses can save money on their tax bill and use the funds saved to reinvest in their business. The recent changes in UK tax law provide even more opportunities for businesses to save money and invest in their operations.

Get in touch

Don’t navigate these changes alone. Contact our experienced team at BK Plus for expert advice on how to incorporate the new capital allowances for plant and machinery into your business strategy.