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Capital allowances and the super deduction - Free Guide

Make use of these allowances while they last.

When a business incurs costs, such as salary payments or stationary procurement, it can usually fully deduct them as expenses from its taxable profits, reducing the tax due. However, when it buys assets for operational purposes, things are not quite so straightforward.

There are HMRC incentives to help you pay less tax on the assets you buy: these are called capital allowances. But there are a myriad of rules for which this tax relief can be applied to get your head around.

Here is a rundown of the main capital allowance tax reliefs.

The super deduction

The super deduction is the most generous of the capital allowances. It gives you 130% first-year relief on qualifying plant and machinery – significantly better than even a fully deductible expense. In fact, it saves you up to £247 in corporation tax for every £1,000 you invest.

There is a catch, though: it is time-limited and expires at the end of March 2023.

It is time-limited because of its generosity. It was introduced in April 2021 as part of the Government’s economic response to the COVID-19 pandemic, a sweetener to encourage apprehensive businesses to invest and boost productivity.

At the time, already low levels of business investment had dropped another 11.6% between Q3 2019 and Q3 2020 – as you will recall, this spanned some of the darkest days of the pandemic.

Download the full guide below;

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