Tax base

Capital allowances

In many countries depreciations are used for tax purposes. In the UK, depreciation is what is shown in the accounts, capital allowances are shown only on the tax computation. The depreciation figures have no effect on the tax situation, all the amounts are added back (ignored). A Capital allowance refers to sums of money a UK business can deduct from the overall corporate or income tax on its profits. There are different rules for different expenditures.

Annual investment allowance amount is £1,000,000. This is for 12-month periods from 1 January 2019.

The maximum amount of the Annual Investment Allowance (AIA) was temporarily increased to £500,000 at Budget 2014. Summer Budget 2015 set the rate of AIA permanently to £200,000 from 1 January 2016. This measure increases the amount of the AIA to £1,000,000 from January 2019.

Director's tax deductible expenses 

Directors can only get tax relief for business expenses they have paid for and if they were for the cost of either:

• travelling they had to do in doing their job
• other expenses directors had to pay in doing their job - and which related only to doing their job. For example directors cannot claim for the cost of ordinary clothing that they wear to work because it is not a cost which only relates to doing their job – directors need to wear clothing both inside and outside of work.