In his Budget statement, Chancellor George Osborne gave some strong reassurance on a significant issue for growing businesses across the UK – the size of the Annual Investment Allowance, which allows businesses to make tax-free investments in machinery and equipment.
The Allowance is currently £500,000, but this was set to fall to just £25,000 at the end of December this year.
In his speech, the Chancellor said: "I am clear from my conversations with business groups that a reduction to £25,000 would not be remotely acceptable – and so it will be set at a much more generous rate."
We would echo the Chancellor's statement that such a huge reduction in the Allowance would not be welcomed by British businesses hoping to make major investments as the economy recovers. It has played a crucial role in supporting investment in up-to-date machinery and equipment helping businesses to ensure a competitive edge.
Businesses would have cheered even louder if the Chancellor had been able to state with certainty what the new rate will be. Those looking to invest towards the limit of the allowance now face a choice - to take full advantage of the current generous rate, or to put their plans on hold, awaiting confirmation of the new rate later in the year.
This may mean waiting until very late in the year for the Chancellor's Autumn Statement. Of course, if Mr Osborne isn't part of the next Government, the next Chancellor is likely to make an 'emergency Budget' statement in June, which may provide an answer.
For businesses wishing to make full use of the Annual Investment Allowance, whilst still avoiding any large up-front costs - Asset finance agreement could be an ideal solution. Speak to a consultant for more information.