What is the Annual Investment Allowance (AIA) in 2026/27?

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The Annual Investment Allowance (AIA) is a capital allowance that lets businesses deduct 100% of qualifying capital expenditure in the year it is incurred, reducing taxable profit immediately rather than over several years through Writing Down Allowances (WDA). AIA limit GBP 1,000,000 per year, permanently set from April 2023 (previously it had fluctuated between GBP 25,000 and GBP 1,000,000). The limit applies per business, not per asset. Who can claim AIA? -- Sole traders -- Partnerships -- Companies -- Not: investment companies, mixed partnerships with non-individual partners (limited AIA availability) Qualifying expenditure -- Plant and machinery (machinery, computers, vans, lorries, tools, equipment) -- Fixtures in commercial properties -- Integral features (electrical systems, water systems, heating systems, lifts -- though these also go into the special rate pool if over AIA) Exclusions -- Cars (including company cars): always excluded from AIA; instead go to main pool at 18% WDA or special rate pool at 6% -- Assets used partly for non-business purposes (only business proportion qualifies) -- Second-hand assets from connected parties in certain circumstances Full Expensing (companies only) From April 2023, incorporated companies can also claim: -- 100% Full Expensing (FE) on new main pool assets with no GBP cap -- 50% First Year Allowance on new special rate pool assets FE and AIA work alongside each other; companies can use FE for new assets without the GBP 1M AIA limit. What happens above GBP 1,000,000? Expenditure above the AIA limit (for businesses not using FE, or sole traders/partnerships who cannot use FE) goes into the relevant WDA pool: -- Main pool: 18% WDA per year on reducing balance -- Special rate pool: 6% WDA per year -- Short life assets: accelerated over 8 years if elected

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