The Super-Deduction Scheme is Ending

The option to claim the super-deduction offering 130% first-year tax relief is soon ending. The deduction is only available to companies until 31 March 2023. The super-deduction was designed to help businesses claim a higher deduction than they would normally qualify for to help finance expansion after the pandemic.

The super-deduction tax break was introduced on 1 April 2021 and allows businesses to deduct 130% of the cost of any qualifying investment on most new plant and equipment investments that would ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 businesses invest they can reduce their tax bill by up to 25p. The temporary tax relief applies to qualifying capital asset investments until 31 March 2023. 

In addition, an enhanced first-year allowance of 50% on qualifying special rate assets also applies to expenditures within the same period. This includes the newest plant and machinery investments that would ordinarily qualify for a 6% special rate writing down allowances. 

The super-deduction is only for companies. This means that self-employed traders are unable to benefit. However, they could benefit from the Annual Investment Allowance (AIA) for investments of up to £1 million. The AIA allows for a 100% tax deduction on qualifying expenditures on plant and machinery. The temporary limit of £1 million will also remain in place until 31 March 2023 before reverting to the usual £200,000 limit.