In general, capital allowances enable businesses to write off expenditure on plant and machinery for tax purposes at either 18% or 8% of the reducing balance of expenditure.
However, the Annual Investment Allowance (AIA) enables businesses to write off such expenditure in full, up to an annual limit (from 1 April 2014 for corporation tax purposes and 6 April 2014 for income tax purposes) of £500,000. The limit is currently expected to revert to £25,000 from 1 January 2016, but an extension of this time limit cannot be ruled out.
For further details of the AIA see our factsheet here.
Business tax team