AIA limit to remain at £1m until 1 January 2022

12 November 2020: The UK government is extending the £1m annual investment allowance cap for a further year in a bid to stimulate investment.

The annual investment allowance (AIA) had been due to revert to £200,000 on 1 January 2021 following a two-year period of being raised to £1m.

Today (12 November) it was announced in a written ministerial statement from Jesse Norman, the Financial Secretary to the Treasury, that the higher threshold of £1m will remain in place until 1 January 2022.

ICAEW’s Tax Faculty highlights that whenever the AIA limit reduces, the transitional rules add complexity for businesses with accounting periods spanning the date of change. In the current economic climate, the extension of the limit provides some welcome certainty and simplification for business.

The AIA is available for expenditure on most plant and machinery, the primary exception being expenditure on cars.