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Definition
The Annual Investment Allowance (AIA) is a capital allowance letting most businesses deduct 100% of qualifying plant and machinery spend — up to £1 million a year — against taxable profit in the year of purchase.
In plain terms
Instead of writing an asset off slowly, the AIA lets you deduct the whole qualifying cost at once, up to the annual cap. Spend £150,000 on equipment and, within the AIA, you knock the full £150,000 off your taxable profit that year.
Why it matters for your company
The AIA gives immediate, full tax relief on investment, which can dramatically cut a corporation-tax bill in the year you invest. Timing spend across a year end shifts the relief between tax years — plan it deliberately.
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