The Annual Investment Allowance is the amount of expenditure on plant on which a business can claim 100% relief in the period of purchase. Last year, the Chancellor increased the AIA from £25,000 to £250,000 for a limited period: it was scheduled to reduce again on 1 January 2015. The rate of AIA will now be increased to £500,000 from 1 April 2014 (companies) or 6 April 2014 (income tax) until 31 December 2015, when it will revert to £25,000.
This is very welcome, and according to the Chancellor should allow 99% of businesses to claim full relief for their expenditure on plant in the period in which they incur it. However, the calculations are very complex where a period of account straddles the change of rate, and anyone contemplating a large purchase to take advantage of the increased limits should take advice before they commit themselves.