Annual Investment Allowance (AIA): Claim £1M Tax Relief on Your CT600

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.

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

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 you owned before using them in the business, or items given to the company
• Purchases from connected parties (for example, buying equipment from a director or a related company)
• Purchases in the accounting period in which the trade ceases

Cars

Cars are excluded from AIA but have their own rules:

CT600 Reporting

AIA claimed against your trade goes in box 690 of the CT600 (there's a separate box, 735, for AIA on non-trading activities such as a property business). The other capital allowance entries — full expensing, main pool and special rate pool allowances, and balancing charges — sit alongside it in boxes 688–730.

The allowance itself reduces your trading profit figure (box 155) via your tax computation. 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

1. Claiming AIA on cars — cars don't qualify
2. Exceeding the limit for short periods — remember to prorate
3. Not claiming at all — many small companies miss this
4. Timing purchases — if you're near the AIA limit, time purchases across accounting periods
5. Connected party purchases — items bought from related parties don't qualify

Full Expensing (Alternative)

Full expensing is now a permanent relief offering a 100% first-year allowance on new main rate plant and machinery, with no annual limit (special rate assets, such as integral features, get a 50% first-year allowance instead). However:

• Only applies to new and unused assets (not second-hand)
• Only applies to companies (not sole traders or partnerships)
• Doesn't apply to cars or assets bought for leasing

For most small companies buying under £1M of equipment, AIA and full expensing achieve the same result. AIA is simpler, covers second-hand items, and gives 100% relief even on special rate assets.

Bought equipment this year? File your CT600 with Taxpipe and claim your capital allowances. £59.

Related Reading

• Capital Allowances and Corporation Tax: How to Claim Tax Relief on Business Assets
• Corporation Tax on Goodwill & Intangible Assets
• Trading Losses & Corporation Tax: How to Claim Relief on Your CT600