What is the Annual Investment Allowance limit for 2026 in the UK?

Full answer

The Annual Investment Allowance (AIA) allows UK businesses to deduct 100% of the cost of qualifying plant and machinery from their taxable profits in the year of purchase, up to a set limit. Current limit From April 2023 the AIA was permanently fixed at GBP 1,000,000 per year. This applies in 2026/27 and beyond. There is no scheduled reduction or expiry date. What qualifies The AIA covers most plant and machinery -- for example, production equipment, commercial vehicles, computer hardware, fitted shopfittings, and agricultural machinery. It does not cover cars (which use the main or special rate writing-down allowance pools), land, or assets bought for leasing to others in most cases. Who can claim Sole traders, partnerships, and limited companies can all claim the AIA. Groups of companies or associated businesses share a single GBP 1,000,000 limit, so it is important to check connected-company rules if your business is part of a larger group. How it works in practice If you spend GBP 400,000 on a new CNC machine and GBP 200,000 on a racking system in the same accounting year, you can deduct the full GBP 600,000 against profit immediately. Spending above GBP 1,000,000 in a year falls into the main capital allowance pool (18% writing-down allowance per year on the remainder). Super-deduction ended April 2023 The 130% super-deduction available to companies between April 2021 and March 2023 has ended. Companies now rely on the AIA and writing-down allowances. Full expensing (100% first-year allowance for companies on new main-pool assets) was introduced from April 2023 alongside the AIA, so incorporated businesses have an additional route to immediate relief. Timing tip If your accounting period straddles 1 January, the AIA is apportioned. A 12-month period aligned with the tax year avoids complexity. Always keep purchase invoices and confirm assets are in use before the year-end to support the claim.

Try the calculator