Last chance to take advantage of 130% super-deduction

In 2021 the government introduced the “super-deduction” to encourage companies to spend money on capital equipment. However, it’s time-limited and is coming to an end on 31 March 2023. What do you need to do to take advantage?

Recap

The super-deduction applies to companies only. It allows you to access a tax deduction of 130% of the cost of most new plant and machinery vs the usual 100% (limits apply).

Timing

To qualify for the super-deduction, you must incur the expenditure on or before 31 March 2023.

Worth claiming?

There are some extra considerations to keep in mind. In particular, the increased corporation tax rate from April 2023. But if taxable profits are beneath £50,000 then it’s worth considering bringing forward any planned capital expenditure to benefit from the super-deduction and bring forward the tax relief.

Worked example

A company with taxable profits of <£50,000 and a year-end of 31 March 2023 is considering the purchase of a new company van at a cost of £15,000.

If they make that purchase before 31 March 2023 then they will make a tax saving of £3,705 from their corporation tax bill which is payable by 1 January 2024.

Should the purchase happen after 31 March 2023, they will make a tax saving of £2,850 from their corporation tax bill which is payable by 1 January 2025.