Glossary · UK
What is Annual Investment Allowance (AIA)?
A capital allowance allowing UK businesses to deduct up to GBP 1 million of qualifying plant and machinery expenditure from taxable profits in the year of purchase.
Full Definition
The Annual Investment Allowance (AIA) provides 100% first-year relief on expenditure on qualifying plant and machinery, up to a GBP 1 million annual limit (set permanently from April 2023 after years of temporary increases from GBP 25,000 to GBP 1 million). AIA is available to sole traders, partnerships and limited companies. Qualifying expenditure includes: machinery and tools, IT equipment, business vehicles other than cars (vans, lorries, taxis), fixtures and fittings in commercial property. Non-qualifying items: cars (claimed via Writing Down Allowance at 6% or 18%), land, assets acquired for leasing, assets bought and used in a period when the business was not trading. If expenditure exceeds GBP 1 million, the excess is claimed via WDA at 18% (main pool) or 6% (special rate pool for long-life assets, integral features). Partnership members each have a proportionate AIA limit. Companies in the same group share the GBP 1 million limit. AIA must be claimed in the accounting period in which the expenditure is incurred (not carried forward). For short accounting periods, the limit is proportionally reduced.