The UK’s Spring Budget 2023 has ushered in some pivotal changes to capital allowances, presenting a golden opportunity for businesses investing in machinery. These reforms are designed to stimulate economic growth by incentivising companies to upgrade their equipment.
Key Highlights for Capital Machinery:
- Full Expensing: From April 1, 2023, companies can claim 100% first-year relief on qualifying new main rate plant and machinery investments. This means businesses can deduct the entire cost of eligible machinery from their taxable profits in the year of purchase, effectively reducing their tax bill by up to 25p for every pound invested.
- Annual Investment Allowance (AIA): The AIA provides 100% first-year relief for any new or used plant and machinery investments up to a total of £1 million annually, available to all businesses, including unincorporated businesses and most partnerships. This permanent measure ensures that a significant portion of machinery investments can be fully deducted in the year of purchase.
Implications for Your Business:
Investing in new metalworking machinery now not only enhances your operational efficiency but also offers substantial tax benefits. By taking advantage of full expensing or the 50% first-year allowance, you can significantly reduce your taxable profits, leading to immediate tax savings.
How does it work?
Currently the 100% Annual Investment Allowance means you can offset 100% of the investment against your taxable profits, up to a limit of the £1m annually. However, the Full Expensing rules means there is no longer a cap on the expenditure. So for example;
If you invested £100,000 on new equipment, at a corporation tax rate of 25%, you could save £25,000 in Corporation Tax because of that investment, effectively saving you 1/4 of the cost of that investment!
Why Act Now?
If your tax year end is fast approaching, and you’re facing a sizeable tax bill as a result of a good year, investing in new equipment now will mean not only that you have the machinery for further growth and improvements for the future, but you can offset a substantial amount of that investment against your taxable profits.
How We Can Help:
As a leading supplier of metalworking machinery, we offer a comprehensive range of equipment that qualifies for these capital allowances. Our team is ready to assist you in selecting the right machinery to meet your operational needs and help you take full advantage of these tax incentives.
Conclusion:
The Spring Budget 2023’s enhancements to capital allowances present a unique opportunity for businesses to invest in new machinery with significant tax benefits. By acting now, you can improve your production capabilities and achieve substantial tax savings.
Contact us today to explore how we can support your machinery investment plans and help you capitalise on these government incentives.
Published 30th April 2023