Chancellor Rishi Sunak has announced a new 130% capital allowance for businesses investing in qualifying plant and machinery.

This is on top of a 50% first-year allowance for qualifying special rate assets, in the biggest business tax cut in modern times.

In a move likely to be welcomed by the UK manufacturing industry, beginning April 2021, the new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment.

This is worth around £25 billion to UK companies over the two-year period the super-deduction will be in full effect. The 130% rate goes further than the so called ‘full expensing’ some have called for.

The OBR has said this will lift business investment by 9% and lift the UK from 30^th in the OECD’s world rankings for business investment to 1^st.

The Conservative Party says for the two-year period this is in place, this will be the biggest business tax cut in modern British history.

Rishi Sunak said: “Business investment creates jobs, lifts growth, spurs innovation and drives productivity. For decades we’ve lagged behind our international peers. Right now, while many businesses are struggling, others have been able to build up significant cash reserves. We need to unlock that investment; we need an investment-led recovery. So today I can announce the ‘super deduction’.”

“Let me give the House an example. Under the existing rules, a construction firm buying £10 million of new equipment could reduce their taxable income in the year they invest by £2.6 million. With the super deduction they can now reduce it by £13 million. We’ve never tried this before in our country… bold, unprecedented action to get companies investing, creating jobs and driving our economic recovery.”

HM Treasury
www.gov.uk/hm-treasury

Further Articles

Most recent Articles