In his Autumn statement, The Chancellor has increased the Annual Investment Allowance (AIA) from £25,000 per annum to £250,000 per annum from the 1st January 2013.
The AIA is a kind of Capital Allowance, which offers tax relief at 100% on qualifying expenditure in the year of purchase. Therefore, you are now able to offset upto £250k against taxable profits. There is a slight caveat though. The amount pro-rata’s depending when the asset is purchased in relation to your year end. In order to obtain 100% you will need to purchase in month 1 of your financial year.
Most entities can utilise the allowance, apart from mixed partnerships (that is , partnerships comprised of both individuals and Ltd companies) and Trustees. Most assets are eligible, apart from Cars.
This increase will have a huge impact on Businesses who have held back from investing over the last few years. This increase could mean a tax saving of £0.50 against every £1 invested in new equipment for their business.
Please see http://www.hmrc.gov.uk/manuals/camanual/ca23084.htm for more information.