The Chancellor Rishi Sunak presented his second Budget on Wednesday 3 March 2021. In his speech he announced the introduction of a super-deduction for companies investing in new plant and machinery.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.
Under this measure a company will be allowed to claim:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
How it works…
When you buy a new item of equipment you can’t write-off its complete cost in the first year you buy it like you would an expense because it becomes an asset used over several years.
In the first year you can claim a fixed % as a “first year allowance” which is set against tax & thereafter as it depreciates, each years depreciation being treated as an expense against tax.
The percentage varies between asset types but generally with Meon’s range of equipment you are able to claim 18% as a first year allowance & then a realistic annual depreciation – Equipment is generally 20% of reducing value per year.
Based on the new temporary tax relief guidelines, an example of saving for an asset costing £10,000 is …
- Previously the normal First Year Allowance would have been 18% which is £1,800 – giving a saving of £342 tax (based on 19% Corporation Tax in that year)
- From April 1st 2021 to 31st Mar 2023 … Super Deduction Allowance is 130% which is £13,000 – giving a new saving of £2,470 tax (based on 19% Corporation Tax in that year)
If you would like to speak to one of our experts on how you can benefit from this new tax relief when purchasing a new machine or equipment from Meon, please call us on 023 9220 0606 or email us on firstname.lastname@example.org
Further reading - https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021/new-temporary-tax-reliefs-on-qualifying-capital-asset-investments-from-1-april-2021