After standing at £100,000 in 2010 AIA has been rapidly increased to the current rate of £500,000. It is an amount of tax businesses can claim back on investment in equipment or other development capital.

>See also: The Annual Investment Allowance explained – 2020 update

Under the current arrangement the temporary figure, aimed at stimulating growth and productivity among businesses, is set to end on December 31. In his March Budget Osborne indicated that this would be reviewed at a further date but gave no firm commitment.

Today’s announcement sees the allowance preserved in a permanent state but at the lower rate of £200,000. While the extension was welcomed, there are many SMEs who wanted the current rate to be maintained or even increased going forward.

Mark Tighe, managing director of capital allowances specialists Catax Solutions, accused the chancellor of “falling short in his promises to support SMEs”.

“With the cap set to fall back to £25,000 at the end of the year, numerous business leaders have already recommended the allowance to be set above the current level of £500,000 – but the Tories haven’t listened,” he warned.

“The Chancellor’s apparent ‘laser-like focus’ on productivity is somewhat misguided and it is now crucial Mr Osborne reevaluates the way in which he intends to help SMEs continue to spend and grow.”

Further reading on the budget:

> Summer Budget full transcript