Summary of Recent Changes to Capital Allowances

The 2018 Autumn Budget confirmed a number of changes to capital allowances, all of which are now in force. Capital allowances can provide substantial tax savings to businesses and it is therefore important that these are maximised where possible.

Structures and building allowance (SBA)

From 29 October 2018, capital allowances are now available for new non-residential structures and buildings. Relief is given at a flat rate of 2% over a 50 year period on eligible construction costs, including costs for new conversions or renovations. The relief is available for UK and overseas structures and buildings provided the business is within the charge to UK tax. Costs in relation to qualifying fixtures and fittings within a building will continue to qualify for capital allowances in the usual way.

Increase to Annual Investment Allowance (AIA)

It was also announced in the Autumn Budget that there would be a temporary increase in the AIA limit from £200,000 to £1million. This increase took effect from 1 January 2019 and will remain until 31 December 2020, meaning businesses have a two year window to take advantage of this limit.  With the new limit being the highest we have seen since the AIA was introduced in 2008, there has never been a better time to invest in business assets.

Reduction in Allowances for Special Rate Additions

From 1 April 2019 (or 6 April 2019 for unincorporated businesses), capital allowances on assets within the special rate pool reduced from 8% to 6%. This change means businesses will take longer to obtain full tax relief on the cost of qualifying assets. Assets which are typically in the special rate pool include cars with CO2 emissions above 110g/km and integral features such as electrical systems.

If you would like more information on capital allowances and how these changes may impact your business, please email our EQ Commercial Property Taxperts at taxation@eqaccountants.co.uk.