The temporary £1,000,000 Annual Investment Allowance (AIA) cap has been extended until 1 January 2022.

The AIA limit on qualifying capital expenditure was originally due to revert back to £200,000 on 1 January 2021.

This extension means that businesses with high levels of capital expenditure can continue to claim up to £1,000,000 AIA in the same chargeable period for investments in plant and machinery assets. Claims can only be made for AIA in the period in which the item was purchased.

Businesses should deduct the full value of an item that qualifies for AIA from their profits before tax. Claims can be made for most plant and machinery purchases, up to the AIA amount, click here to view qualifying expenditure.

The Government has extended the temporary cap on AIA to stimulate investment in UK manufacturing and to increase confidence in businesses as they plan for the future.