Firms reassured as investment allowance frozen at £200,000

Suzie Neuwirth
BUSINESS groups yesterday heralded the government’s decision to freeze the annual investment allowance at £200,000, although some called for the tax break to be raised higher.

The allowance aims to encourage business growth by offering tax relief to small and medium-sized firms investing in equipment, plant and machinery.

The allowance is currently set at £500,000 but was set to reduce to £25,000 from 1 January 2016.

“Confirmation that the investment allowance will proceed on a permanent basis at £200,000 ends the seven year rollercoaster ride this part of the tax system has been on,” said manufacturer’s association EEF. “It will give small businesses, in particular, the certainty they need about how investments in productivity enhancing equipment will be treated for tax purposes.”

The Confederation of British Industry also welcomed the move, but the Institute of Directors said that the allowance is still far too low.

“The current temporary allowance is £500,000, and many businesses were hoping it would have been raised even further,” said the IoD.

“A £200,000 fixed limit is not enough to boost productivity.”