Annual investment allowance
You can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax.
If you sell the item after claiming AIA you may need to pay tax.
What you can claim on
You can claim AIA on most plant and machinery up to the AIA amount.
What you cannot claim on
You cannot claim AIA on:
- business cars
- items you owned for another reason before you started using them in your business
- items given to you or your business
Claim writing down allowances instead.
The AIA amount
The AIA amount has temporarily increased to £1 million between 1 January 2019 and 31 March 2023.
Changes to the AIA
The AIA amount has changed several times since April 2008.
If the AIA changed in the period you’re claiming for, you need to adjust the amount you claim.
|AIA||Sole traders/partners||Limited companies|
|£1 million||1 January 2019 - 31 March 2023||1 January 2019 - 31 March 2023|
|£200,000||1 January 2016 - 31 December 2018||1 January 2016 - 31 December 2018|
|£500,000||6 April 2014 - 31 December 2015||1 April 2014 - 31 December 2015|
|£250,000||1 January 2013 - 5 April 2014||1 January 2013 - 31 March 2014|
|£25,000||6 April 2012 - 31 December 2012||1 April 2012 - 31 December 2012|
|£100,000||6 April 2010 - 5 April 2012||1 April 2010 - 31 March 2012|
|£50,000||6 April 2008 - 5 April 2010||1 April 2008 - 31 March 2010|
You get a new allowance for each accounting period.
If your accounting period is more or less than 12 months
Adjust your AIA if your accounting period is more or less than 12 months.
If your accounting period is 9 months the AIA will be 9/12 x £200,000 = £150,000.
You may also need to adjust the amount you claim if the AIA changed in that time.
The rules are different if your accounting period is longer than 18 months or you have a gap or overlap between accounting periods.
When you can claim
You can only claim AIA in the period you bought the item.
The date you bought it is:
- when you signed the contract, if payment is due within less than 4 months
- when payment’s due, if it’s due more than 4 months later
If you buy something under a hire purchase contract you can claim for the payments you have not made yet when you start using the item. You cannot claim on the interest payments.
If your business closes, you cannot claim AIA for items bought in the final accounting period. Instead, you need to enter a balancing charge or a balancing allowance on your tax return for the year you close your business. Read more about how to claim capital allowances.
If you do not want to claim the full cost
If you do not want to claim the full cost, for example you have low profits, you can claim:
Items you also use outside your business
You cannot claim the full value of items you also use outside your business if you’re a sole trader or partner. Reduce the capital allowances you claim by the amount you use the asset outside your business.
You buy a laptop for £600. You use it outside your business for half of the time. The amount of capital allowances you can claim is reduced by 50%.
If you spend more than the AIA amount
Claim writing down allowances on any amount above the AIA. If a single item takes you above the AIA amount you can split the value between the types of allowance.
AIA is not available for partnerships where one of the partners is a company or another partnership.
More than one business or trade
If you’re a sole trader or a partner and you have more than one business or trade, each business usually gets an AIA.
You only get one AIA if the businesses are both:
- controlled by the same person
- in the same premises or have similar activities
If 2 or more limited companies are controlled by the same person they only get one AIA between them. They can choose how to share the AIA.
How to claim
Claim on your tax return. Read more about how to claim capital allowances.