Many businesses have been making use of the current annual investment allowance for capital expenditure. This allowance allows a business to claim 100% of capital expenditure against its taxable profit, meaning that the tax payable is significantly reduced.
The relief is currently capped at £500,000 per annum but from 1 January 2016, it will be reduced to £200,000 per annum. For the majority of businesses, the reduction will not significantly affect their tax liabilities, as they don’t spend more than £200,000 per annum on capital equipment.
However, if you regularly spend over £200,000 per annum (or your business is planning a large one off purchase) you need to think carefully about the timing of the purchases to maximise the tax savings available. Without suitable planning, you could potentially forfeit a tax saving of £49,200 at the end of the year.
If you are considering a major purchase, or regularly have this level of expenditure, it’s probably worth having a chat with us to make sure you get the timing right.