The Super Deduction – 130% Tax Relief

Kirsty Young Business Tips, Expenses, Limited Company, Tax

Announced in the 2021 budget, the new Super Deduction measure allows you to get even more tax back than before when buying ‘the big stuff’, such as:

  • New vans
  • New computers
  • Equipment

What does it apply to?

The Super Deduction applies for ‘qualifying expenditure’ bought between 1st April 2021 and 31st March 2023 in your limited company. Sadly, there is currently no equivalent for sole traders and partnerships, although these types of businesses can still claim the generous Annual Investment Allowance.

What purchases qualify for a Super Deduction?

The main important qualifying condition that’s unique to the Super Deduction is that what you are buying must be brand new. (There are other existing tax reliefs available for second-hand equipment).

The qualifying conditions are very detailed, but in a nutshell, you need to be operating a business and buying equipment for the purposes of your trade.

How does a Super Deduction benefit my business?

In short, you’ll pay less tax! You will receive a generous 130% tax relief, in one go. (Yes, you did read that right. 130%. If only all tax benefits were like this!) In practice, this means for every £1 you spend, you are saving around 25p in tax.

For example, if you bought a new MacBook Pro for £2000, you will save around £500 in tax off your next tax bill.

Previously when buying the ‘big stuff,’ you might have spread tax relief over many years (for example, when buying a vehicle). The new Super Deduction relief gives you the full amount in the first year, at the enhanced rate.

What do I need to do to claim?

This is the fun part – spend some money! Then claim it in your company tax return. It really is that straightforward.

We would never advise anyone to spend money to save tax, as you will always spend more than the saving it produces. However, if you need to replace or investment in equipment, now is a great time to do it.

Have a look at when your company year-end is. For the maximum instant relief, try to buy any items before then, to impact on your next tax bill.

Want to make the most of the Super Deduction?

If you don’t have an accountant, or feel you aren’t making the most of tax deductions with your current accountant, we’d love a chat about how we can help.