Annual Investment Allowance (AIA): Claim £1M Tax Relief on Your CT600
The Annual Investment Allowance (AIA) lets your company deduct the full cost of qualifying plant and machinery from taxable profits — up to £1 million per year. This is one of the most generous tax reliefs available.
How AIA Works
When your company buys qualifying equipment, instead of deducting the cost over several years (writing down allowances), you can deduct 100% of the cost in the year you buy it, up to the annual limit.
Example
Your company buys a CNC machine for £80,000.
| Without AIA | With AIA |
|---|---|
| Year 1: £14,400 (18% WDA) | Year 1: £80,000 (100%) |
| Year 2: £11,808 | Year 2: £0 |
| Years 3-10: gradual deduction | |
| Total: £80,000 (over 10+ years) | Total: £80,000 (immediately) |
With AIA, you get the full tax relief in year 1. At 25% Corporation Tax, that's a £20,000 reduction in your tax bill — immediately.
AIA Limit
| Period | Annual Limit |
|---|---|
| From 1 April 2023 | £1,000,000 |
The £1M limit is permanent (after years of being temporary). For short accounting periods, the limit is proportionally reduced.
6-month period: AIA limit = £1,000,000 × 6/12 = £500,000.
What Qualifies?
✅ Qualifying Assets
- Machinery and equipment
- Office furniture and fittings
- Computer hardware
- Vehicles (vans, lorries — but not cars)
- Tools
- Commercial kitchen equipment
- Solar panels and energy-efficient equipment
- Integral features (electrical, heating, air conditioning systems)
❌ What Doesn't Qualify
- Cars — have their own capital allowance rules
- Land and buildings — use Structures & Buildings Allowance instead
- Items for leasing to non-business users
- Second-hand items bought from connected parties
Cars
Cars are excluded from AIA but have their own rules:
| CO₂ Emissions | Allowance |
|---|---|
| 0 g/km (electric) | 100% First Year Allowance |
| 1-50 g/km | 18% Writing Down Allowance |
| 51+ g/km | 6% Writing Down Allowance |
CT600 Reporting
Capital allowances (including AIA) go in Box 230 of your CT600.
You'll also need a capital allowances computation as part of your tax computation, showing:
- Assets purchased
- AIA claimed
- Any balancing charges or allowances on disposals
Common Mistakes
- Claiming AIA on cars — cars don't qualify
- Exceeding the limit for short periods — remember to prorate
- Not claiming at all — many small companies miss this
- Timing purchases — if you're near the AIA limit, time purchases across accounting periods
- Connected party purchases — second-hand items from related parties don't qualify
Full Expensing (Alternative)
Since April 2023, full expensing offers 100% deduction on new plant and machinery with no annual limit. However:
- Only applies to new assets (not second-hand)
- Only applies to companies (not sole traders)
- Doesn't apply to cars or assets for leasing
For most small companies buying under £1M of equipment, AIA and full expensing achieve the same result. AIA is simpler and covers second-hand items.
Bought equipment this year? File your CT600 with Taxpipe and claim your capital allowances. £59.