In a welcome move for businesses, the Chancellor announced plans to set the annual investment allowance at £1m on a permanent basis
The annual investment allowance threshold has been permanently set at £1m, rather than reverting to £200,000 as was originally planned for April 2023, Kwasi Kwarteng confirmed.
This is a 100% capital allowance for qualifying expenditure on plant and machinery up to a specified annual limit and covers the investment needs of 99% of the UK’s businesses.
This tax break will provide a £930m boost to business in 2023-24, rising to £1.3bn in 2024-25.
Adrian Young, tax partner at Hurst, said: ‘This allowance enables businesses to take full relief for the first £1m of capital expenditure they incur. Kwarteng’s hope here is that this will continue to encourage businesses to invest in new and more efficient technology.’
The constant changes to the level of the annual investment allowance continues to give concern.
Chris Sanger, EY’s head of tax policy, said: ‘Whilst this Chancellor went out of his way to differentiate himself and the government from Chancellors past, in at least one way he shared the habits of his predecessors.
‘Changing the level of annual investment allowance has featured in many recent Budgets and today was no exception. The drop from £1m to £200,000, due next year, has been reversed, with the AIA now set ‘permanently’ at £1m. Renowned as the ‘yo-yo’ incentive, we may yet wonder how ‘permanent’ this change will be this time.’
Simon Crookston, partner at Crowe UK said: ‘The Chancellor should have been bold and provided greater incentives for businesses to be innovative and invest. There are targeted reliefs for businesses in investment zones but for those businesses not in these zones there is limited additional support.
‘In these current times of increasing inflation and reduced growth we need to further stimulate the economy to encourage growth, enable real time wage increases and promote prosperity.
‘It is a real shame that the Chancellor did not provide further additional incentives to encourage further investment in solar, wind, water turbines and other green initiatives, particularly in relation to renewable energy. We need to radically change our approach in the current energy crisis and the Chancellor seems to have ignored this in his new approach for a new era.’