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.
Example of such are building, or floors or any other asset that has been specifically disallowed by tax law.
Eight percentage of relief on capital expenditure.
The 8% rate is usually used for the special rate pooled plant and machinery.
Good examples of these are an integral part of the building like air conditional unit, lift escalators, etc.
Some cars that are high emission cars are also special rate pooled.
The meaning of that is it’s just 8% relief that can be deducted.
Eighteen per cent relief on capital expenditure.
18% is used for plant and machinery that are kept in the general pool.
This just basically plants and machinery that does not qualify for annual investment allowances.
Most common reasons why such an item is in the general pool is mostly because 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.
Some cars with low emission, 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 can qualify for AIA.
Increase Annual investment Allowance for capital expenditure.
As at the last year, the maximum AIA you can claim was £200,000: There has however been a temporary increase up to £1 million that means you can actually invest in a plant and machinery for you in 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.
So the advice our Northampton accountants have is to use the allowance on special rate pooled items before applying on general pooled items.
For more advice on the capital allowance, kindly contact us.