Is the AIA still £1 million?

Yes. The AIA limit is £1,000,000 per 12-month accounting period and it is permanent. The £1m level started as a temporary increase in January 2019 and was made permanent from April 2023; the £200,000 reversion was cancelled and no reduction is scheduled.

Does the AIA reduce my tax bill directly?

It reduces taxable profit, which reduces the tax calculated on it. A £10,000 AIA claim cuts taxable profit by £10,000; the cash saving is that amount at your marginal rate. For a company that is 19%, 25%, or an effective 26.5% in the marginal-relief band; for a higher-rate sole trader it can exceed 40% once Class 4 NIC is included.

Can I carry unused AIA forward to next year?

No. The AIA is use-it-or-lose-it. If you spend £100,000 in a year, the other £900,000 of headroom does not roll into the next period; each 12-month period brings a fresh £1m limit. Unclaimed expenditure (as opposed to unused headroom) is different, it simply falls into a pool for writing down allowances.

Is there a minimum spend for the AIA?

No. The AIA applies from the first pound of qualifying expenditure. A £300 office chair and a £300,000 machine both get 100% relief in the year of purchase, provided the asset qualifies as plant and machinery and the £1m cap is not exhausted.

Corporation Tax

AIA Allowance: The Key Figures at a Glance

20 May 2026Emma Carter2 min read

A quick reference for the annual investment allowance. The AIA gives 100% tax relief on qualifying plant and machinery up to a permanent £1,000,000 per 12-month period, for companies, sole traders and partnerships, on new and second-hand assets alike. The core numbers, one worked example, and links to our detailed guides on claiming mechanics and relief-choice planning.

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Key takeaways

The AIA allowance gives 100% tax relief on qualifying plant and machinery, up to £1,000,000 per 12-month accounting period.
The £1m limit is permanent; the £200,000 reversion was cancelled when the level was made permanent from April 2023.
Companies, sole traders and most partnerships can claim, on new and second-hand assets; cars never qualify, and double cab pickups count as cars for expenditure from April 2025.
Unused AIA headroom does not carry forward; each 12-month period brings a fresh £1m limit.
Spend the AIA does not cover falls into a pool for writing down allowances at 14% (main rate, periods from April 2026) or 6% (special rate).

Accountant reviewing capital allowance claim for AIA on a laptop in a Leeds office

The annual investment allowance (AIA) lets a UK business deduct the full cost of qualifying plant and machinery from taxable profit in the year of purchase, up to £1,000,000 per 12-month accounting period.^[1] The £200,000 reversion was cancelled; the £1m level was made permanent from April 2023 and no reduction is scheduled.

The AIA in One Screen

Relief rate	100% of qualifying cost, in the year of purchase
Annual limit	£1,000,000 per 12-month period (permanent); scaled pro rata for shorter periods, e.g. £500,000 for 6 months
Who can claim	Limited companies, sole traders, partnerships (not partnerships with a corporate partner)
New or used	Both, provided the seller is not a connected person
Covers	Plant and machinery: equipment, tools, vans and lorries, computers, furniture, fixtures and integral features
Never covers	Cars (including double cab pickups for expenditure from April 2025, per HMRC CA23511), buildings and land, leased assets, gifts
Carry forward	None; unused headroom is lost each period
Above the cap	Excess spend goes to a pool for writing down allowances: 14% main rate for periods beginning from April 2026 (18% before), 6% special rate
How you claim	In the capital allowances computation on the CT600, SA103 or SA800; no separate form

What the AIA Is Worth: One Worked Example

An Aberdeen landscaping company, year ending 31 December 2025, buys a second-hand excavator for £60,000. Profit before capital allowances is £110,000.

Without the claim, corporation tax is 25% x £110,000 = £27,500, less marginal relief of 3/200 x (£250,000 - £110,000) = £2,100, so £25,400. With a full AIA claim, taxable profit falls to £50,000, taxed at the 19% small profits rate: £9,500. The AIA saves £15,900 in the year of purchase. Because the excavator is second-hand, full expensing would not have been available; the AIA is the only 100% route here.

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Where the Detail Lives

This page is the quick reference. The depth sits in two companion guides:

Claiming mechanics, meaning exactly what qualifies, vans versus cars and the double cab pickup change, second-hand and connected-party rules, how related companies share one £1m limit, short periods, private-use apportionment and the boxes on the return: AIA capital allowances: what qualifies and how to claim.
Choosing the right relief, meaning how the AIA compares with full expensing (companies only, new assets), the 40% first-year allowance (from 1 January 2026) and writing down allowances, and the situations where claiming less than the maximum is the smarter move: annual investment allowance explained.

For the position in the current year specifically, including the changes taking effect either side of the 2025/26 year, see our annual investment allowance 2025/26 guide.

To have a planned purchase reviewed before you commit, contact us or browse our services.

Sources

Claim capital allowances: annual investment allowance. GOV.UK. gov.uk/capital-allowances/annual-investment-allowance. Retrieved 2026-08-25.

Corporation tax bill bigger than you expected?

We look at the allowances, the timing and the reliefs before the return is filed, not after.

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