From April 1st 2021 until March 31st 2023, businesses investing in qualifying assets will benefit from up to 130% first-year capital allowance. The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.
This allows businesses to deduct an additional 30% on the full value of qualifying assets from profits before tax. The full tax relief is received in the year that assets are purchased rather than over several years, therefore reducing tax liability.
This applies to many qualifying assets ranging from Telephone Systems to IT equipment to new solar panels or a new fork lift truck.
An example of how this could work would be a business that is thinking of spending £2,000 on new telephone system. If they make the purchase, they will be able to deduct £2,600 from their taxable profits. With corporation tax currently at 19%, that equates to a saving of £494 on their company’s tax bill. Prior to this last budget, that saving would have been £380 – some £114 less.
For more information on this allowance from HM Revenue & Customs, refer to their website: www.gov.uk or contact your own accountant / financial advisor.