The capital allowances super deduction is coming to an end on 1st April 2023.
The super deduction allows businesses to claim capital allowances on qualifying plant and machinery at 130%. Giving an additional 30% more than usual.
The super deduction is only for assets that have been purchased as new, normal rates apply for second hand assets.
With the corporation tax rate increasing to 25% in April 2023 for companies with profit over £250,000, the super deduction was brought in to encourage businesses to purchase assets sooner, rather than delay until after April 2023 and obtain a higher rate of tax relief.
Businesses with profits over £250,000 will not be affected by the removal of the super deduction.
Businesses with profits up to £50,000 will be most affected.
If your profits are £50,000, and you purchased new plant or machinery (includes vans but not cars) of £30,000 your tax relief before April 2023 would be £7,410. From April 2023 with the removal of the super deduction the tax relief would be £5,700.
Therefore if your profits are up to £50,000, or the purchase of plant and machinery would move taxable profit below £50,000 then it would most likely be best to purchase that asset before 1st April 2023. This only is applicable for brand new assets, not second hand.
If you would like to discuss the most effective ways for your business to reduce it’s tax liability, please contact us here, or call 01245 801611.