Investing in new business equipment or manufacturing machinery can help boost productivity and efficiency, and allow you to broaden the range of services and products your business offers. However, it’s essential to understand the financial implications of this, including budgeting, where grants or financial support is available, tax benefits, and depreciation.

Before embarking on buying any new equipment, or upgrading what you have, make sure you have a comprehensive budget to assess the costs and potential returns. Below are the key steps.

Identify your equipment needs

Work out the specific equipment or machinery upgrades your business requires. Consider their functionalities and how they align with your production goals. Are they an urgent need to meet existing requirements? Or are they for future development and could potentially be delayed if finances are tight?

Research costs and different models

A common mistake in procurement of new equipment can be to be led by an impromptu sales offer or opportunity that seems ‘too good to miss’. Have patience! Research the market to check what different models offer, speak to other business owners or seek out online reviews to find out what’s worked for similar companies, and compare pricing information and quotes. Don’t forget to account for delivery, installation, training, and ongoing maintenance costs.

Assess financing options

A number of current business funding schemes are summarised below. However, navigating these with regards to eligibility and knowing whether they are right for your business can be a daunting task. If you require further support, please contact our team who will be happy to help.

Local Schemes

North Yorkshire Council Small Business Grants

North Yorkshire Council Decarbonisation Support

Made Smarter

National Schemes

British Business Bank Finance Hub
British Business Bank is a Government-owned, independently-run bank that helps businesses find the right finance options. The Finance Hub has been built to help businesses understand and discover finance options. There are various options on equity funding and loans, as well as articles and resources to help you make the right choice.

Business Enterprise Fund
This government-backed scheme offers a range of flexible loan solutions. They are the delivery partners for the Start-up Loan Company and the Northern Powerhouse Investment Fund, but also offer a growth loan.

Creative Growth Finance
Loan-funding scheme offering investment to businesses in the creative industries. They are suitable for companies looking to scale-up or, through the development of existing or new technology, develop new products and services which will meet emerging client demand, provide a significantly better service and enhance the company’s competitive edge.

Federation of Small Businesses
Provides non-profit supporting small businesses across the UK. A business will need to pay for membership fee, but in return they can access a wide range of benefits including: legal advice; advocacy; funding; networking and events; and specialist advice.

Finpoint
Finpoint is a platform that supports businesses to secure the funding they need to grow. It can help businesses to navigate the complex funding market to find the right lender. The business will need to prepare one funding application that can be shared anonymously with over 120 lenders, including banks, specialist finance houses and alternative finance providers.

Forward Enterprise Fund
This national funding organisation, run by The Forward Trust, aims to help ex-offenders and people in treatment from addiction get into work. Businesses can access loan funding to assist with developments that will allow them to recruit from these groups and provide opportunities for people to engage with work.

Funding Circle
The UK’s largest example of a peer-to-peer lending platform, which will connect businesses who want to grow with investors who want to lend. Peer-to-peer lending is simply when businesses able to borrow funding directly from other organisations and individuals or ‘peers’. Businesses can apply online and get a dedicated account manager for an unsecured loan.

Gigabit Voucher Scheme
Offers a grant which can contribute towards the cost of installing a gigabit capable connection. Businesses can claim up to £2,500 against the cost of connection, either individually or as part of a group project.

Innovate UK
Government-supported database of competitions for grant funding and innovation vouchers. There are a range of schemes available across sectors and the support can help to: research and develop a process, product or service; test an innovative idea; and collaborate with other organisations.

Key Fund
Key Fund are a lender and grant provider with a difference – they support social enterprises, and are a dedicated finance scheme for these businesses. They are the delivery partners on several schemes, and businesses will be directed to the right scheme for them.

Manufacturing Growth Programme
Grant towards the investment of an external expert. Their specialism could cover a range of topics and there is a lot of flexibility with regards to the projects that it can cover. However, main project areas include: business strategy; finance; leadership and management; customer and supplier relationships; R&D; productivity and capacity; systems and procedures; quality (e.g. accreditation), competitiveness; marketing; continuous improvement; and the implementation of environmental measures.

Kriya Lending
This scheme offers support for businesses that need to boost their cash flow whilst they’re waiting to receive payment on their goods or services. If the business invoices for goods and services that they’ve delivered and need to wait for them to get paid for, this will provide funds much quicker.

Northern Powerhouse Investment Fund
This loan funding scheme is aimed at growing businesses that struggle to obtain finance from primary finance markets (e.g. banks). It’s useful for businesses looking to build working capital to support new investment projects, such as expansions, new premises, machinery and equipment, new employees, export etc.

Plunkett Foundation
Plunkett Foundation provides project and business funding, mentorship, advice and support to established rural businesses looking to preserve themselves, and for new ventures who have seen a gap in their village and want to fill it.

Start Up Loans
Delivered by the Business Enterprise Fund, this scheme provides loan funding for businesses that have been trading for under two years to help them get off the ground. Flexible loans are unsecured and no guarantors are needed, meaning that they are a low-risk method of gaining working capital to help with set-up and initial expansion.

UK Business Angels Association
Angel investors are wealthy individuals who invest their funds into a business for a small share of that business. The UK Business Angel Association, can offer guidance and advice on what to look for and how to structure the agreement, as well as put you in touch with potential investors or investment networks.

UnLtd
UnLtd is the support, development and advocacy group for social impact organisations in the UK. They run various social inclusion programmes, some of which have grant, loan, or blended funding attached to them. They also award small amounts of business funding to help organisations test and start their ideas through their dedicated start-up programmes.

Virgin Start-Up Loans
A delivery partner for the Start-Up Loan Company, with a scheme particularly interested in new brands and products. Businesses must have been trading under two years. There is also a dedicated business support offer with this programme. Alongside the loan, businesses can receive mentoring and business planning advice.

If you require further support, please contact our team who will be happy to help.

Tax benefits

In addition to grants, businesses in the UK can take advantage of tax benefits related to equipment upgrades:

Research and Development Tax Relief – The UK Government’s R&D Tax Relief Scheme encourages businesses to invest in innovation by offering tax relief on qualifying research and development expenditures. For eligibility criteria and application details, visit the official UK Government website here. This initiative not only fosters innovation but also boosts economic growth, solidifying the UK’s global leadership in R&D.

Annual Investment Allowance (AIA): The AIA allows businesses to claim 100% tax relief on qualifying capital expenditures, including equipment and machinery, up to £1 million (at October 2023).

First-Year Allowances (FYAs): FYAs provide 100% tax relief on specific energy-efficient or environmentally beneficial equipment and machinery.

Writing-Down Allowances: These can be claimed if your plant and machinery does not qualify for AIA or you’ve already claimed the maximum amount

Calculating depreciation

Depreciation is the accounting method used to allocate the cost of an asset (such as machinery or equipment) over its useful life. In the UK, common methods for calculating depreciation include:

Straight-Line Depreciation: This method evenly spreads the cost of the asset over its expected useful life. The formula is Annual Depreciation Expense = (Cost of Asset – Residual Value) / Useful Life

Reducing Balance Depreciation: This method applies a higher depreciation expense in the earlier years of the asset’s life and reduces it gradually over time. It’s often used for tax purposes.

The formula for reducing balance depreciation depends on the rate applied and the asset’s carrying amount at the beginning of the accounting period.

It’s essential to consult with an accountant or financial professional to determine the most appropriate depreciation method for your business and to ensure compliance with accounting and tax regulations.

Upgrading and buying new business equipment can have significant financial implications, both in terms of costs as well as the potential benefits. Make sure you budget carefully, and fully research the grants and tax benefits that are available. By making informed, evidence-based decisions and making the most of the available financial incentives, your business can expand and achieve long-term success.

Learn more

See what funding sources are available

Look at Made Smarter for information on grants and support for technology and digitalisation