Posted on | by Jade Donno

Are you ready for some capital allowances fun? 🙌 🥳

Yeah, we know it’s not the most exciting topic, but stick with us because it’s important. Capital allowances are like the superhero of the UK tax system, providing businesses with tax relief on certain types of capital expenditure. However from April 2023, they’re changing! 

Super Deduction

First up, we have the Super-Deduction. This is a type of capital allowance that provides businesses with a 130% tax deduction on qualifying investment in new plant and machinery. That’s right, you heard us, 130%! It’s like getting an extra boost of power to your capital expenditure. This is designed to help businesses invest in new equipment and machinery, and has been a game-changer. 

But you better act fast because the Super-Deduction is only available for investments made between 1 April 2021 and 31 March 2023. So, if you’re planning to upgrade your plant and machinery, make sure to take advantage of this superpower before it’s too late. 

Special Rate Pool 

Next up, we have the Special Rate Pool, which is used for assets that are eligible for a lower rate of capital allowances. While it’s not as exciting as the Super-Deduction, it’s still an essential part of the capital allowances world. From April 2023, the rate for the Special Rate Pool will be reduced from 6% to 3%. It’s not ideal, but hey, we can’t win them all. 

Annual Investment Allowance

Moving on to the Annual Investment Allowance (AIA), which provides businesses with 100% tax relief on qualifying investment in plant and machinery, up to a certain limit. The good news is that the AIA limit is staying the same at £1million of capital expenditure. 

General Pool Allowances

Last but not least, we have General Pool Allowances. This allows businesses to claim tax relief on assets that don’t qualify for the AIA or exceed the AIA limit. From April 2023, the WDA rate will be reduced from 18% to 16%. It’s not a significant reduction but still something worth being aware of.  

In conclusion, the world of capital allowances is evolving from April 2023. But, as with any superhero story, there are some ups and downs. The Special Rate Pool and General Pool Allowance are getting a little weaker, while the super deduction is leaving us. So, make sure to plan your capital expenditure carefully and consult with a tax professional to ensure that your business is making the most of the available allowances. 

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