Answers · UK 2025/26
How much is the Annual Investment Allowance worth in 2026/27?
The Annual Investment Allowance lets a business deduct the full cost of qualifying plant and machinery, up to £1,000,000 a year, from its taxable profit. For a company paying 25% corporation tax, £100,000 of qualifying spend cuts the tax bill by £25,000 in the year of purchase.
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The Annual Investment Allowance (AIA) is a 100% first-year capital allowance that lets businesses deduct the full cost of qualifying plant and machinery from taxable profits in the year of purchase, rather than spreading the cost over many years through writing-down allowances. For 2026/27 the AIA limit is £1,000,000 of qualifying expenditure per year. Qualifying items include most equipment, machinery, tools, computers, commercial vehicles such as vans, and certain fixtures, but not cars (which have their own rules) or buildings. The value of the allowance is the tax saved: for a company paying corporation tax, the saving is the spend multiplied by your corporation tax rate. So £100,000 of qualifying equipment saves a company on the 25% main rate £25,000 of tax, and a small company on the 19% rate saves £19,000. For a sole trader or partnership the saving is at your income tax marginal rate, so a higher-rate taxpayer saves 40% plus the relevant National Insurance. Companies can also use full expensing, a separate uncapped 100% first-year allowance for new and unused qualifying plant and machinery, which sits alongside the AIA. The AIA limit is shared between associated companies and apportioned for accounting periods shorter or longer than 12 months. Timing purchases to fall before your year end can accelerate relief, which is useful for managing a profit near the £50,000 or £250,000 corporation tax thresholds. Use the corporation tax calculator to see how capital allowances reduce your taxable profit.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.