We helped Rana’s Bakery get the equipment leasing package they needed to fulfil a big new order

Annual Investment Allowance for asset finance

If you’ve bought or are thinking about buying assets for your business, you might be able to claim tax relief on them through the Annual Investment Allowance (AIA).

Fill in our 3-minute eligibility checker on this page to see your asset finance funding options. We’ll show you the best finance for your situation and support you through the whole process – from your first enquiry to money in the bank and beyond.

What is the Annual Investment Allowance (AIA)?

The AIA gives businesses a way to claim tax relief on some assets. If you buy plant and machinery for your business, the AIA allows you to deduct the cost of that asset from your profit for that year before working out how much tax you’re due to pay on that profit.

In January 2019 the government introduced an increase to the amount businesses can claim in plant and machinery costs through the AIA. You can now invest up to £1million and claim tax relief up to that amount – previously the limit was £200,000.

This is a temporary increase to the AIA – the limit is due to change again on 31 December 2020. It’s not yet been announced what the limit will be after this date.

What assets are eligible for the Annual Investment Allowance?

Businesses can claim on the following assets for the AIA:

  • Vans or lorries used for moving purposes
  • Machinery – including tractors and other agricultural machinery
  • Office equipment – including furniture, computers, computer hardware and some types of software
  • Some building fixtures – like fitted kitchens, bathroom fittings and air conditioning
  • ‘Integral features’ for your business premises – including things like heating, electrical systems, water systems, lifts, escalators and lighting systems
  • CCTV systems and fire alarms

It doesn’t matter whether you own or rent the building you’re claiming assets for, but only the person who bought the item can claim the AIA on that item.

Assets that aren’t eligible for the AIA include:

  • Cars
  • Buildings
  • Other structures like bridges
  • Land
  • Anything you lease through your business – you must own the item to claim the AIA
  • Assets given to your business that you didn’t pay for
  • Assets that you owned for another reason before you started using them for your business

Why was the AIA introduced?

Following the 2007/08 Financial Crisis, the UK government wanted to stimulate the economy and do as much as possible to help businesses grow. They brought in the AIA to encourage businesses to invest in machinery and other assets. This was to give businesses the ability to do more work themselves with those new assets, and to give a boost to other businesses – i.e. the businesses from which assets like machinery could be bought.

Check your asset finance funding options with our 3-minute eligibility checker on this page – it’s free and there’s no obligation!