What is Annual Investment Allowance (AIA)?

The Annual Investment Allowance (AIA) gives businesses a 100% first-year tax deduction for qualifying plant and machinery purchases, up to a limit of £1 million per year. Unlike normal writing-down allowances spread over several years, the AIA lets the full cost of an eligible asset — such as machinery, tools, commercial vehicles and computer equipment — be deducted in the year of purchase, reducing the tax bill immediately. The AIA is available to most UK businesses, including sole traders, partnerships and limited companies. Certain assets are excluded, notably cars and assets used partly for private purposes.