Annual Investment Allowance for SMEs to be set at £200,000

THE Chancellor delivered a boost for SMEs in this afternoon’s Budget as he announced that the Annual Investment Allowance will be set at its highest ever permanent level at £200,000.

George Osborne said that the allowance, which has previously been increased temporarily, will be set permanently at this figure from January 2016.

Mr Osborne said: “If Britain wants to produce more, it needs to invest more. Many small and medium sized businesses have benefitted from our enhanced Annual Investment Allowance. This Allowance was set at £100,000 when we came to office – it is higher now, but without action it will fall to just £25,000 at the end of the year.”

“That would especially hit middle-sized companies in areas like manufacturing and agriculture that we want to do more to build up in Britain. So I can confirm that the Annual Investment Allowance will not fall to £25,000 but be set at £200,000; this year and every year.”

Mr Osborne said the decision would provide a “major, permanent boost to the incentives for long-term investment” by small and medium sized firms in Britain.

The allowance means businesses can deduct the full value of certain items such as equipment and machinery up to a total value of £200,000 from their profits before tax, which in turn helps cash flow as full tax relief is given in the year items are bought rather than over several years.