Capital Allowances for UK Businesses Investing in Equipment

28 October 2021


Following the rollout of the latest UK budget, businesses are no doubt looking for means to save on expenses and reduce operational overheads to account for lean periods. Luckily, the government has recently rolled out two new allowances to incentivise companies to invest in qualifying equipment. 

Applicable for capital investments made between 1st April 2021 and 31st March 2023, there are two new incentives: the SR allowance and the super-deduction, which afford businesses the opportunity to benefit from an increased deduction in tax in the year of purchase relative to normal rates.

Subject only to businesses who pay corporation tax--as opposed to individuals and partnerships--the allowances will run concurrently with the 100% relief afforded by the Annual Investment Alliance (capped at £1m per for the calendar year 2021), and they’ll only apply to expenses incurred after 1st April 2021. 

What will the allowance cover? 

The super-deduction will cover any new plant equipment and machinery that would otherwise fall under the 18% primary rate of allowances, while the SR allowance covers investments on equipment and machinery (plus building features) that fall under the 6% allowance. 

Equipment attained by hire companies will not be eligible for the allowance, though businesses that themselves operate in that capacity can still benefit from the allowance, following the equipment investment. 

Rates of tax relief 

The SR allowance will afford businesses a 50% relief for the first year (before falling to the 6% for subsequent years thereafter), and the super-deduction will provide a 130% relief for plant and machinery assets 

Find out more about capital allowances

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