Full expensing and the AIA: the tax relief behind every smart CNC purchase
· 365AF
Buying CNC machinery in 2026? Full expensing and the £1m Annual Investment Allowance can take a serious slice off the real cost — and both work with hire purchase. Here's how the reliefs interact with finance.
The single biggest lever on the real cost of a CNC machine isn't the interest rate — it's the tax treatment. Two reliefs matter in 2026, and both sit comfortably alongside asset finance.
Full expensing
Companies buying new and unused plant and machinery can deduct 100% of the cost from taxable profits in year one, with no upper limit. On a £150,000 machining centre, that's a corporation tax saving of up to £37,500 for a company paying the 25% main rate — in the same year the machine is installed.
Key points:
- Applies to companies (not sole traders or partnerships) and to new equipment.
- Works with hire purchase: HMRC treats HP as ownership from delivery, so you claim the full deduction even though you're paying monthly.
- Does not apply to finance leases or operating leases, where the lessor owns the asset.
The Annual Investment Allowance (AIA)
The AIA gives a 100% first-year deduction on up to £1 million of qualifying spend per year — and unlike full expensing, it covers used machinery and is available to sole traders and partnerships as well as companies. For most SME workshops buying a used CNC machine, the AIA does the same job full expensing does for new kit.
Why finance and the reliefs work so well together
Claiming a 100% deduction doesn't require paying 100% of the price up front. On hire purchase:
- You pay a deposit plus the VAT (VAT-registered businesses reclaim the VAT on the next return).
- You claim the full capital allowance in year one.
- The tax saved often exceeds the first year's finance payments — the relief effectively funds the early part of the agreement.
Timing matters. The deduction lands in the accounting period the machine is brought into use — a machine installed just before your year-end accelerates the saving by a full year.
A note of caution
Tax positions differ by business — balloon structures, losses, and group relief all change the picture. We arrange the finance; your accountant should confirm the allowance treatment before you sign. Get both on a call together and a CNC purchase can be structured properly in an afternoon.