5 Rivers Accountancy

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Year-End Strategy #2: Capital expenditure timing for Ltd Companies with 31 Dec year ends

Buy equipment in December, not January, and get tax relief THIS year.

Here's how it works:
The principle:
Capital expenditure (equipment, vehicles, computers, machinery) gets tax relief in the year you buy it.

Buy in December 2025 = tax relief in 2025
Buy in January 2026 = tax relief in 2026
Same purchase. Different tax relief year.
Example 1: New laptop and equipment
You need £5,000 of IT equipment.
Option A: Buy in January 2026
Tax relief: 2026
Corporation tax saved: £1,150 (in 2027)
Option B: Buy in December 2025
Tax relief: 2025
Corporation tax saved: £1,150 (in 2026)
You get the tax relief 12 months earlier.

Example 2: Company vehicle
You need a new electric van for the business.
Cost: £35,000
Electric vehicles get 100% first-year allowance.
Buy in December 2025:
Tax relief: £35,000 this year
Tax saved: £8,050 (£35,000 × 23%)
Buy in January 2026:
Tax relief: £35,000 next year
Tax saved: £8,050 (but 12 months later)
The £8,050 difference in your cash flow matters.

Important: Don't buy just for tax relief

Bad decision:
"I'll buy £50,000 of equipment I don't need to save £11,500 in tax."
You've spent £50,000 to save £11,500.
Net cost: £38,500.
That's expensive.

Good decision:
"I'm buying £50,000 of equipment I need anyway. Should I buy in December or January?"

He turned down £500,000 for his business.
Now it's worth £0.
True story. Former client, Background:

Small manufacturing business.
Been running 15 years.
Decent, consistent revenue.
Comfortable profit.

2019: Received an offer for £500,000
Business broker approached him.
Buyer willing to pay £500k cash.

He turned it down.
Why?
"It's worth more than that."
"I'll build it bigger and sell for £1m."
"I'm not ready yet."

Fair enough. His choice.

What happened next:
2020: COVID hit. Revenue dropped 40%.
2021: Tried to recover. Took on debt to survive.
2022: Key client left. Lost 30% of remaining revenue.
2023: Closed the doors. Business worthless.

He walked away with nothing.
Actually worse than nothing, he had £80k in personal guarantees to repay.

The lesson isn't "he should have sold."
The lesson is: Nothing lasts forever

-Markets change
-Customers leave
-Competition evolves
-Your energy fades
-Opportunities don't wait

Banking your entire future on a business sale is risky:

Buyers back out
Markets shift
Your business might not be sellable when you're ready
Personal circumstances change (health, family, burnout)

The better strategy:
Build wealth OUTSIDE your business while you build the business.
How:
1. Pension contributions (from the company)
£20k/year for 15 years @ 6% growth = £465k
2. Investment properties (using profits)
Buy 2-3 over 10 years = £300-500k equity
3. ISA investments (personal savings)
Max out each year=£100-200k over 10 years
4. New Consultancy Revenue