Government increase maximum Annual Investment Allowance – how will you invest?
On 1st January 2019, the government increased the maximum amount of the Annual Investment Allowance (AIA). Since January 2016, the rate of AIA has been £200,000. However, in order to stimulate business investment in the economy, the government has increased the rate to £1,000,000 to give incentive for businesses to invest in plant or machinery until 1st January 2021.
What is the Annual Investment Allowance?
The AIA is a measure to provide accelerated tax relief for plant and machinery investments. Qualifying assets may also include equipment, tools, vans, lorries and diggers. Most businesses, regardless of size are able to claim AIA on their expenditure on plant or machinery up to a specified amount each year. As of 1st January 2019, the rate is now £1,000,000.
Essentially, the upfront AIA permits a business to deduct the total amount of qualifying capital expenditure (up to a certain limit) from its taxable profits in a given tax year. The AIA speeds up the tax relief available and therefore helps a business’s cash flow.
Who can claim AIA?
Any business entity. The only ineligible businesses are those in mixed partnership structures.
Why invest in your business?
The need to continually invest in your business is self-evident. However, we have put together a list of 3 creative reasons that might tip the scales for you:
1. To modernise your business
A lot of businesses that don’t invest tend to slowly lose customers. In the modern era, consumers tend to have a shorter attention span. This means that you need to hold onto their attention to retain and grow your customer base. By keeping your business up to date with new equipment, computers, machinery and vehicles, your customers know that your business is compatible with the modern era.
1. To be more eco-friendly
Your business is always in the limelight. You have customers that base their first impressions on your shop, equipment, staff and the vehicles you drive. If you are not making an effort to be eco-friendly, this could be a cause for concern for customers. Not only can eco-friendly cars and equipment help the environment but they can also save you money.
2. To be creative
Being innovative and creative with your business is difficult without investment. In order to stand out from your competitors and gain more market share and attention from consumers, it is always a good move to be creative with your business. Do this by investing in new equipment that makes your customers’ shopping experience more exciting.
So, how are you going to invest?
There are many options to invest in your business, and with the increased AIA rate, now is the best time. Some examples of assets for business purposes that can be claimed as qualifying expenses for AIA are:
• Office equipment and furniture
• Agricultural machinery
• Computer hardware and certain types of software
• Integral features (parts of building)
• Building fixtures and fittings, such as kitchens and air conditioning units
• Commercial vehicles such as vans and lorries
• Machinery used for business purposes such as lathes and tooling machines
• Fire alarm and CCTV systems
Whatever you are thinking about investing in, make sure you take advantage of this increased rate.
Get a loan from Bira Bank
If you are thinking about investing in your business this year, Bira Bank can help you with competitive equipment and vehicle loans. If your investment qualifies for the AIA, it is likely that Bira Bank can support your purchase. If you don’t know whether your investment qualifies, call David or Frank on 0121 446 6688 for clarity.
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