Farmers across the UK are being urged to make sure they take full advantage of the new Annual Investment Allowance (AIA) of £1million which came into force on 1 January 2019 and will remain at that level for 2 years.
AIA gives 100% tax relief on the cost of new plant and machinery in the year of purchase. The Allowance has been £200,000 up until this year and the temporary increase means there has never been a better time to review ageing and unreliable kit and consider purchasing new. Even if items are purchased on finance, the full cost is eligible for AIA, with the added bonus that interest charges are also tax deductible.
It is important, however, that tax-payers consider carefully the timing of any large capital purchases, as the Allowance runs from January 2019 to December 2020 and will be apportioned according your accounting date. On 1 January 2021, AIA will return to £200,000.
If you are considering purchasing new kit in the next couple of years, you should speak to your accountant before making any final decision. They can calculate the maximum amount of AIA available for each tax year and help you time your purchase in the most tax-efficient way.