Super Deduction for Capital Allowances

15/02/2023

Last chance to claim enhanced tax relief on business assets

In April 2021 the government introduced the Super Deduction for Capital Allowances, for Limited Companies. This was to encourage businesses to invest in new equipment and save more tax, but it ends on 31 March, 2023.

The initiative is simple in that for every £100 you spend on equipment for your business, you get tax relief of £130, so a deduction of 130%.

Let’s look at how this works:

Dave runs a small IT company and he needs to buy new laptops for his staff.

His profit for this financial year to 31 March 2023 is currently £155,000, with potential corporation tax due of £29,450.

If Dave were to buy 9 laptops at £1,200 each, this would normally reduce his profit by £10,800, saving him corporation tax of £2,052.

However, under the super deduction rules he would save tax of £2,668, so an extra £616.

Let’s break it down..

Normal Capital Allowance Enhanced Capital Allowance

Profit for the year £155,000 £155,000

Tax relief on laptops £10,800 (100%) £14,040 (130%)

Taxable profit £144,200 £140,960

Corporation tax £27,398 £26,782

Extra tax saving £616

To qualify for this additional saving, you must purchase any new assets by 31 March, 2023 (regardless of when your financial year ends) and we will claim the additional allowance automatically for you.

Please note: If you have purchased business assets since April 21 then we will have already claimed this extra relief for you.