The Annual Investment Allowance (AIA) provides a tax write-off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.

The AIA is reduced from £1,000,000 to £200,000 from 1 January 2021 and the AIA will be reduced for expenditure incurred after this date.

For accounting periods that straddle the change, a pro rata calculation of the maximum entitlement is required.

So for an accounting period for the year ended 31 March 2021, the AIA will be £800,000 (9/12 x £1,000,000 plus 3/12 x £200,000).

The available AIA spend for the period 1 January to 31 March is restricted to a maximum of £50,000, so the timing of the expenditure around 1 January 2021 is critical.

Please contact the Tax Team to find out what this change will mean for your business on 0161 761 5231 or email