A temporary increase to the annual investment allowance has been extended until 1 January 2022, the Treasury has confirmed.

The allowance enables firms to fully offset the cost of qualifying capital items of plant and machinery against taxable profits.

Since 1 January 2019, businesses have received faster tax relief for plant and machinery investments up to £1 million.

After two years, the measure was due to close on 31 December 2020 and revert back down to £200,000 from 1 January 2021.

Financial Secretary Jesse Norman said:

"It is vital that we support business through the difficult months ahead.

"Extending the annual investment allowance's £1m cap will give businesses the confidence they need to invest into next year."

Jeremy Coker, president at the Association of Tax Technicians, added:

"The extension will be very welcome for businesses with higher levels of qualifying capital expenditure.

"However, for many businesses whose relevant annual expenditure is no more than £200,000, it will simply delay an unwelcome complication.

"The Government should consider amending the legislation, so the allowance does not produce counter-intuitive results for businesses with lower levels of expenditure."

Contact us about the annual investment allowance.

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