Changes to Writing Down Allowances (WDA) are about to be brought into play.
From April 1, businesses investing in assets that fall under ‘plant and machinery’ and fall under the Special Pool Rate, will see rates cut from 8% to 6%.
This comes after the Annual Investment Allowance increase was introduced in January.
Capital allowances allow businesses to write off the costs of capital assets, such as plant or machinery, against their taxable income.
When claiming WDA, businesses group their assets into three pools. They’re separated as a main pool that has a rate of 18%, a special rate pool that now has a new rate of 6% and a single asset pool where rates are dependent on the type of asset.
All assets go into the main pool unless they are:
- Parts of a building that are integral (escalators, lighting etc.)
- Items with a long life (useful life of at least 25 years from new)
- Thermal insulation of buildings
- Cars with CO2 emissions of more than 130g/km
It should be noted that businesses should only put the assets with long life into the special rate pool if their collective value adds up to £100,000 in a single accounting period.
If they are valued at less than £100,000, then you can put them into the main rate pool.
The new rate will be effective from:
- 1 April 2019 for businesses within the charge to Corporation Tax
- 6 April 2019 for businesses within the charge to Income Tax