What Is the New ‘Super Deduction’ and What Does It Mean for Your Business?
The new ‘super deduction’ announced in the recent Budget has certainly got everyone talking. Hailed as a measure to boost investment and productivity throughout the UK in the post-Covid landscape, what does this wonder product actually mean for business?
The super deduction is essentially an enhancement to the existing tax relief already available through capital allowances claimed on new qualifying plant and machinery.
How the Super Deduction Works
The super deduction takes the form of:
- 130% first-year allowance on capital expenditure normally eligible for 18% writing down allowances (WDAs)
- 50% first-year allowance on capital expenditure normally eligible for 8% WDAs
One key difference to note here is that, unlike the current Annual Investment Allowance (AIA), the super deduction is uncapped.
The Fine Print: Limitations and Eligibility
As always, the small print reveals important limitations. While the super deduction offers significant incentives, it may be less beneficial in practice for some businesses.
- Purchases must be made between 1 April 2021 and 1 April 2023.
- The asset purchase contract must not have been entered into before 31 March 2021.
- The relief is only available to incorporated companies (i.e. limited companies).
- It only applies to new plant and machinery — not second-hand equipment.
- Assets acquired as part of a property transaction do not qualify — unless the property is new and purchased directly from the developer.
- Special rate pool assets are only eligible for the lower 50% deduction.
Need More Information?
For further guidance on eligibility and how to claim the super deduction, visit the official UK Government resource here: