A temporary increase sees the annual investment allowance (AIA) double to £500,000.
AIA was introduced in 2008 to encourage businesses to invest in capital equipment. Under the regime, businesses may claim capital allowances of 100 per cent of the expenditure incurred.
Since its introduction, the threshold has been increased and decreased and then increased again in Finance Act 2013 to £250,000.
The increased limit of £250,000 was intended to be for a temporary, two-year period, for qualifying capital expenditure incurred in the period from 1 January 2013 to 31 December 2014, after which time the allowance would revert back to £25,000.
The move was heralded by business leaders looking to invest in the future and there were calls for the temporary £250,000 annual investment allowances to be made permanent.
The Chancellor responded in Budget 2014 by increasing AIA from £250,000 to £500,000 per annum with effect from 1 April 2014 for companies, and 6 April 2014 for unincorporated businesses, up to 31 December 2015.
This is another temporary increase and the AIA limit will revert back to £25,000 per annum with effect from 1 January 2016.
Businesses that incur expenditure on plant and machinery will be able to obtain capital allowances of either 18 per cent or 8 per cent on any excess.
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