I’m planning to buy some new equipment for my business. Can I claim the cost for tax?

As a general rule, if an expense is incurred for business purposes then it can be deducted from income to reduce the taxable profit in the year of payment. Equipment purchases have long been the main exception to this rule. Because they will be used by the business over the course of several years, the expense has historically been spread across several years for tax purposes as well. 

Fortunately for most small businesses, there is a provision that allows them to claim the cost in full in the year of purchase. This provision is known as the Annual Investment Allowance (AIA). First introduced in April 2008, this permits businesses to claim the full cost of a certain amount of asset purchases in the year they are acquired. The AIA sets an upper limit for the total amount that can be claimed in this way. Since its inception this limit has varied considerably, at one time being only £25,000, with the figure being £200,000 up until recently. 

From 1 January 2019 the AIA has been increased to £1,000,000. Whilst this will take the provision well beyond its original target, it does mean that most small businesses will be able to purchase assets without worrying about whether they can claim the cost.

Whilst the AIA will be sufficient for most small businesses, there are other asset purchases that qualify separately for 100% first year allowances. These include low-emission cars (as mentioned elsewhere on this page)
and energy saving equipment. If the AIA is insufficient for your business, you should seek professional advice as to whether these other allowances apply.


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