Answers · UK 2025/26
What is the Annual Investment Allowance (AIA) in the UK for 2026/27?
The Annual Investment Allowance for 2026/27 is £1,000,000. It allows businesses to deduct 100% of qualifying plant and machinery expenditure in the year of purchase. It has been permanently set at £1 million since April 2023 and applies to companies, sole traders, and partnerships.
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The Annual Investment Allowance (AIA) is the most important capital allowance for most UK businesses investing in plant and machinery. Key facts for 2026/27: - Limit: £1,000,000 per year - Rate: 100% first-year deduction - Permanent: the £1m limit was made permanent from 1 April 2023 (corporation tax) / 6 April 2023 (income tax) What qualifies: - Plant and machinery: equipment, computers, machinery, vans, most commercial vehicles. - Fixtures integral to a building (integral features): electrical systems, cold water systems, heating/cooling, lifts. These previously had their own £200,000 cap but are now within the AIA. - Certain renovations. What does NOT qualify for AIA: - Cars (must use Writing Down Allowance: 18% main pool or 6% special rate pool depending on emissions). - Assets purchased in the final accounting period before cessation of a business. - Assets used for leasing (some restrictions apply). For companies: - 100% expensed against taxable profits in the year of purchase, reducing corporation tax by up to 25% of the asset cost. For sole traders and partnerships: - Deducted against business profits, reducing income tax at marginal rate. Connected company rules: - The £1m AIA is shared between associated/connected businesses under common control. Groups cannot claim multiple AIAs. Alternative -- Full Expensing (for companies only): - Since April 2023, companies also have access to Full Expensing: 100% first-year allowance on main pool plant and machinery with no annual cap. This effectively supersedes AIA for larger companies but AIA remains important for sole traders, partnerships, and for qualifying for the special rate pool.
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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.