Annual Investment Allowance (AIA)
A UK tax relief allowing businesses to deduct the full cost of qualifying assets from taxable profits in the year of purchase.
The Annual Investment Allowance (AIA) allows UK businesses to deduct the full cost of most plant and machinery purchases from their taxable profits in the year the asset is purchased, up to an annual limit. The current AIA limit is £1 million per year. This can significantly reduce the business's corporation tax or income tax bill in the year of the investment.
AIA applies to assets purchased under a hire purchase agreement from the date the asset is brought into use - even though the full purchase price has not yet been paid. It does not apply to finance leases (where the lender retains ownership) or operating leases. AIA can be claimed on most types of plant, machinery, tools, equipment, and commercial vehicles.
The AIA is one of the key tax advantages of using hire purchase over a finance lease when acquiring assets. Consult your accountant to ensure AIA is available for your specific asset and purchasing structure.
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