Capital Allowance rates vary depending on the plant and expenditure.
To explain the rate I will be using the various percentages associated with each allowance.
Zero percentage on capital expenditure.
0% simply means the business owner can’t claim capital allowance on that plant and machinery.
Examples of such are building, floors or any other asset that has been specifically disallowed by tax law.
Eight per cent of relief on capital expenditure.
The 8% rate is usually used for the special rate pooled plant and machinery.
Good examples of these are integral parts of the building like air conditioning units, lift escalators, etc.
Some cars that are high emission cars are also special rate pooled.
The meaning of that is it’s just an 8% relief that can be deducted.
Eighteen per cent relief on capital expenditure.
18% is used for plants and machinery that are kept in the general pool.
These are just basically plants and machinery that do not qualify for annual investment allowances.
A most common reason why such an item is in the general pool is mostly that the annual investment allowance has been exhausted or some cars.
Hundred per cent relief in capital expenditure.
100% represents two main allowances, the first one is the Annual investment allowance and the second one is the first year allowance.
The first-year allowance is used for any plant and machinery that are environmentally friendly or beneficial to technology.
For some cars with low emissions, less than 50kg/m you can actually claim 100% relief.
The AIA is an annual investment allowance.
This is for any plant and machinery that are used in the business except for cars for any tax reason that can qualify for AIA.
Increase Annual Investment Allowance for capital expenditure.
As of the last year, the maximum AIA you can claim was £200,000: There has however been a temporary increase up to £1 million which means you can actually invest in a plant and machinery for you your business that qualifies for AIA of up to 1 million pounds.
Now, this is temporary it means they will take this increase off at some point.
Using the Annual Investment Allowance on Special rate pooled item.
So this is the best time for you to invest in your business now.
The main tax advice is for special rate pooled items, you can claim AIA on the special rate pooled item.
For more advice on the capital allowance, kindly contact us.