Capital allowances / annual investment allowance

[Deleted User]

I'd just like to check my understanding of the new AIA from April 2008 please:

Say I qualify as a small co so get the 50% in year 1 and buy a laptop costing £1000:

Old system, ie buying this tax year:
basic rate tax saving = 1000 * 50% (FYA) * 22% = 110, subsequent years 20% pa capital allowances (previously 25%);
or if higher rate, saving = 1000 * 50% * 40% = 200, then 20% pa.

New system ie buy after 6/4/08:
basic rate = 1000* 22% = 220, no subsequent allowance as done in one go
or if higher rate, saving = 1000 * 40% = 400, nothing in following years.

So there's an obvious gain by waiting to buy a laptop (say) to qualify under the new rules, unless you're higher rate this tax year and basic rate next. I think the expenditure is limited to 50k.

Questions:
Is the above example correct?
Is the new system definitely coming in?
Is the 25% write-down definitely dropping to 20% from 2008/09?

Many thanks for your help.

meester

See here:
http://www.hmrc.gov.uk/legislation/pu451.pdf

You would probably write off the laptop after 3 years or so, and get the remaining tax relief then. So the tax savings don't change, it's just that you get it all up front.

The main purpose is to reduce administration and accountancy costs for small business. It's also slightly more attractive to invest if you aren't going to have to spend the next five years fiddling about with asset pools.

The legislation has not been passed yet, but surely will be.