June Budget – Capital allowances
The Government is to introduce legislation that will reduce the rates of writing down allowances (WDAs) for chargeable periods ending in April 2012. This will reduce the tax relief available for qualifying capital expenditure. The WDAs will reduce to18% (from 20%) per annum for expenditure
allocated to the main rate pool. WDAs for expenditure related to the special rate pool will be reduced to 8% (from 10%).
There will be a ‘hybrid’ rate for businesses with chargeable periods that do not end on 31 March 2012 or 5 April 2012.
In addition the maximum amount of annual investment allowance (AIA) will be reduced to £25,000 (from £100,000). This change will also be effective from April 2012.
HMRC will publish details of the transitional arrangements prior to the introduction of the reduced allowance.