capital Purchases - Super Deduction

Thinking of buying a capital item? Why it might pay to hold off for a few weeks...

In his recent budget, Rishi Sunak announced a new super deduction to encourage investment by companies. For capital expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments.

Purchases made before the 1st April are not eligible for this relief so if you are considering buying capital items now it would be beneficial to hold off till after this date.

Assuming use of the Annual Investments Allowance, currently you can claim the full cost of capital items against the trading profit of the company to reduce your corporation tax liability. This new deduction means you can offset 130% of the cost of the capital item against your trading profits. At current corporation tax rates this means an additional reduction in tax of 5.7% of the cost of the capital item.

the relief is only open to companies so the self employed and partnerships will not be eligible to use this deduction and therefore cannot utilise this tax saving scheme.