The start of a new financial year is the perfect time for a business to re-evaluate budgets, review investment strategies, and identify opportunities for better tax efficiency. One area that offers both practical and financial advantages is the use of asset finance.
What is asset finance?
Asset finance allows a business to acquire equipment, vehicles, or machinery without needing to pay the full cost upfront. Instead, costs for the asset are spread over time through hire purchase, leasing, or refinancing. This helps to preserve working capital while still giving access to the tools a business needs to grow.
Claiming tax relief through asset finance
A major advantage of asset finance is its compatibility with HMRC’s capital allowances. For example, the Annual Investment Allowance (AIA) lets businesses deduct the full value of qualifying purchases (up to a certain limit) from taxable profits. By using asset finance, businesses can still claim the full relief, even while making monthly or quarterly payments.
In some cases, leasing arrangements may allow businesses to treat repayments as operational expenses, offering another layer of tax efficiency. It is essential to structure agreements properly, so speaking with a finance broker or accountant is recommended.
Manage VAT and improve cash flow
VAT can be a stumbling block for businesses making large purchases. Some asset finance solutions allow for VAT deferral, meaning the VAT is spread across payments or even delayed until it can be reclaimed. This reduces cash flow pressure, especially at the start of a new financial year when budgets can be tight.
Strategic timing matters
Investing in new assets early in the financial year gives a company more time to benefit from tax relief and generate returns on the investment. With repayments structured to suit specific revenue cycles, it becomes easier to manage finances over the long term.
Real-world impact: Asset finance in action
Recently we have demonstrated how asset finance is helping UK businesses move forward with confidence. A designer and manufacturer of bespoke kitchens recently used asset finance to acquire a large spray oven and paint room, with equipment valued at £100,000. By spreading the cost and benefiting from capital allowances, they preserved working capital while upgrading production capabilities. Similarly, a company based on the South Coast specialising in the manufacture of used car motor parts was able to secure £300,000 for new vans and trailers through asset finance, enabling them to scale delivery operations efficiently without upfront capital strain.
It is important that asset finance is not just seen as a purchasing tool, it is a smart strategy for tax planning, cash flow optimisation, and business growth. At the start of the financial year, it pays to think ahead and explore how asset finance can be used to initiate new growth initiatives.
If you have any questions or would like to understand more about asset finance, please speak to our specialist team of finances experts. Call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.
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