If you are one of the many that have spent money on property in 2015 then this is a timely reminder to ensure that you are making full use of the £500,000 Annual Investment Allowance (AIA) before it is reduced at the end of the year.
Firstly, let us recap on the general principles. The AIA is a first year tax allowance which enables the cost of certain qualifying property expenditure to attract 100% tax relief in the year of expenditure. This is compared to claiming the standard rates of Capital Allowances where the tax relief is taken over a number of years. Noting that the AIA is available for both corporate and income tax payers, including overseas investors.
It offers investors the opportunity to take advantage of a significant cash benefit arising out of a number of sources, namely, on developments, refurbishments, fit outs and also when buying property.
As an example, if you were a high net worth individual and you had £500,000 of allowable expenditure this year, you would get a tax deduction of £225,000. At its current level, the AIA makes reviewing what may seem to be a small claim value, now more beneficial to pursue.
This however has a limited offering, given that the government have already announced that the AIA is to remain at its current level only up until 31 December 2015, after which the AIA drops to £200,000. So the message is to claim now before it is too late.
There is also the opportunity to implement some tax planning, should a known capital project be due to commence around that time. By making the payment unconditional before the 31 December 2015, it will enable the payment to attract the AIA even though the physical monies paid out will be in the following period.
Contact one of our Directors to discuss how you can take advantage of this and we can offer a free, no obligation initial review.