November 10, 2025
Article
With machinery prices having increased considerably over the past few years coupled with the possibility of being chargeable to inheritance tax post 6 April 2026, what other options are there for attaining the machinery you require to get the work done?
Once you have identified what machinery is essential to your day-to-day workload and what machinery is used sometimes throughout the year compared to what could be done by outside contractors - especially for specialised operations - you can formulate a plan for what is needed.
Purchasing machinery that you always need, such as a feeder wagon on a dairy farm, should then be costed to establish the running costs, including depreciation, so that you know what it is costing you, either annually or by the hour. The old saying of if you ‘don’t measure it you can’t manage it’ comes to mind.
Once you have an idea of the costs you can look at what options are available to you, including outright purchase, hire purchase, finance lease or operating lease - in simple terms an operating lease is a hire agreement where you don’t own the asset and therefore under current reporting requirements, it will not be capitalised as part of the business balance sheet.
There are different tax rules for each option so make sure you understand which will work best for you.
Machinery dealers will offer a variety of options to ensure they get your business now, so don’t be afraid to ask them, to help decide which works best for you.
For machinery that you don’t need throughout the year, you need to decide if you can hire it for the time you need it, jointly own it to reduce the cost to you or can instruct contractors to do the work, at the right time for the right price.
Using contractors instead of doing it yourself can free up working capital and time. The cost of doing the work is known, there are no surprise repair bills and staff are not tied up elsewhere. The contractor may not be available when you need or want them, but with prior planning any delays can be managed as effectively as possible.
Machinery hire allows you to access machinery for a set price, by the hour, day or week. This allows you to have a new machine that will be more efficient on fuel and less likely to breakdown, which means there will be no surprise repair bills, and you do not have capital tied up in the machinery.
Collaboration - in some circumstances you could collaborate with a neighbour or another business to buy machinery jointly. This may be particularly useful for high value items, such as self-propelled forage harvesters or combines. The cost can be split as agreed and the relevant tax allowances claimed.
With delays in being able to acquire machinery for delivery on farm it is never too early to start a plan. To ensure you maximise the tax relief on any purchases you need to make sure you give yourself time to get the deal done.
We would never advise you to buy machinery to save tax but discussing your strategy with us can help ensure you get the right option for you, at the right time and in a tax efficient way.