The 2018 Budget delivered opportunities for businesses, intended to support and encourage them to invest.

One of the key developments confirmed by the Chancellor – but originally announced in previous Budgets – is that corporation tax will fall to 17% from 2020. This new low rate will make incorporation more attractive for smaller businesses and reduce the tax burden for companies of all sizes.

Along with the cut in headline rate, the Chancellor also announced some specific measures around business investment.

Capital allowances

The annual investment allowance (AIA) will increase from £200,000 to £1,000,000 for all qualifying investments in plant and machinery. The increased allowance only applies on investments between 1 January 2019 and 31 December 2020.

The AIA allows a company to deduct the full value of an investment from profits before tax, and can be claimed against items that you keep to use in your business, including cars, costs of demolishing plant and machinery, parts of a building considered integral, known as ‘integral features’, some fixtures, e.g. fitted kitchens or bathroom suites, and alterations to a building to install other plant and machinery – although note this doesn’t include repairs

Alongside this, a new structures and buildings allowance has been introduced which has been set at 2% on construction or conversion costs over 50 years, where all the contracts for physical construction works were entered into from 29 October 2018.

It’s not all good news, however, as the government has also reduced the special rate reduction from 8% to 6%, affecting qualifying plant and machinery assets.

If you are planning any investments for your business, get in touch to discuss what tax-efficient options are available to you.