How Full Expensing Works
Full expensing (introduced April 2023, made permanent from April 2026) allows UK limited companies to deduct 100% of qualifying new plant and machinery expenditure against corporation tax in the year of purchase. On a £200,000 CNC machine this produces a £50,000 tax saving (at 25% CT) in Year 1 - far superior to the old 18% writing-down allowance which would have generated only £9,000 in the first year.
Sole traders and partnerships cannot use full expensing but may use the Annual Investment Allowance (AIA), which has a £1m limit per year.
Combining Full Expensing with Hire Purchase
Because HP is treated as a purchase for tax purposes, assets acquired under HP from day one of the agreement qualify for full expensing. This combination is powerful:
- You finance 70–90% of the asset cost, preserving cash
- You claim 100% of the asset cost as a tax deduction in Year 1
- The effective net cost of the asset is dramatically reduced
- The monthly HP payments are fixed and budget-certain
Why HP + Full Expensing Can Beat Finance Lease
Under a finance lease, you never own the asset and HMRC treats the leasing company as the owner. Only the annual lease rentals are tax-deductible - no capital allowances apply. Over a 5-year lease on a £200k machine, you spread £200k of deductions over 5 years. Under HP + full expensing, you deduct £200k in Year 1.
£200k CNC Machine - HP + Full Expensing
Asset: New Mazak 5-axis CNC machining centre, £200,000 Finance: HP over 60 months, deposit £20,000, finance £180,000 at 7.0% Monthly payment: approx. £3,560/month Full expensing: 100% of £200,000 = £200,000 deducted in Year 1 Tax saving (25% CT): £50,000 in Year 1 Effective net machine cost (after tax): £150,000 - paid over 5 years