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Budget 2021: Super deductions - a new temporary tax relief for businesses

Budget 2021: Super deductions - a new temporary tax relief for businesses

Sunil Sharma

The chancellor introduced a new ‘super deduction’ to be used for the first time in the UK, in the Budget on 3rd March 2021.  This is a new increased temporary tax relief for companies who invest in certain qualifying capital assets from 1 April 2021 and is anticipated to stimulate £25bn in business investment in the UK.  

It will allow for a temporary first-year allowance; with a super-deduction of 130% on most new plant and machinery which would have ordinarily qualified for 18% relief, and a first year allowance of 50% on most new plant and machinery which would have ordinarily qualified for 6% relief. This will provide an accelerated timing benefit and also additional tax relief on expenditure incurred. 

The treasury believe that this measure will reduce a company’s tax bill by 25p in every pound invested in qualifying plant and machinery.

We await finer details of the ‘super deduction’ such as if it applies to partnerships, individuals and LLPs as well however one thing which is clear is that the government are keen to build its way out of an economy battered by this pandemic.