Welcome back to our Top Tax Tips for Directors series, where we provide valuable insights to help directors optimise their tax position and business finances. In this edition, Matt explains the benefits of investing in qualifying assets, helping you take full advantage of tax reliefs while growing your business.
What are qualifying assets?
Qualifying assets are business-related purchases that count towards the Annual Investment Allowance (AIA). These typically include:
- Plant and machinery
- Office equipment and IT infrastructure
- Commercial vehicles (excluding cars)
- Fixtures and fittings in business premises
By investing in these assets, companies can benefit from 100% tax relief under the AIA, reducing their corporation tax liability.
Matt explains more in our latests video:
How does the Annual Investment Allowance work?
The Annual Investment Allowance limit is currently set at £1 million, meaning businesses can deduct up to £1 million of qualifying expenditure from their taxable profits each year. This significantly lowers corporation tax bills and encourages reinvestment into business growth.
- If your company invests £100,000 in new machinery, the full amount can be deducted from your taxable profits.
- With a corporation tax rate of 25%, this could save your business £25,000 in tax.
Why invest in qualifying assets?
- Immediate tax savings – Claiming 100% of the cost upfront reduces tax liability in the current financial year.
- Business growth – Investing in better equipment or technology improves efficiency and productivity.
- Future-proofing – Upgrading assets ensures your business remains competitive and compliant with regulations.
- Cash flow management – Instead of large tax bills, you can reinvest savings into your business.
Key considerations when claiming AIA
- Check asset eligibility – Ensure the purchase qualifies under HMRC rules.
- Timing matters – Align purchases with your financial year for maximum tax efficiency.
- Leased vs. purchased assets – Only purchased assets qualify, so leased equipment doesn’t count towards AIA.
- Stay within the limit – If your total investment exceeds £1 million, standard writing-down allowances may apply instead.
Make the most of your tax allowances
Investing in qualifying assets is a strategic way to reduce your tax bill while strengthening your business. With the right planning, you can maximise tax relief and boost profitability.
Need expert advice on making the most of your tax allowances? Get in touch with our team today.
