Capital Allowances on Vans: AIA, Full Expensing and the 2026 Changes

Vans qualify for 100% capital allowances in year one through the Annual Investment Allowance or full expensing, and from April 2026 there is a further option: the 40% first-year allowance on new main-rate plant introduced by Finance Act 2026 s.29. The fallback writing-down allowance drops from 18% to 14% from April 2026 under FA 2026 s.28, which makes year-one claims more valuable than before. Getting the classification right matters: a vehicle HMRC treats as a car cannot access any of these reliefs.

What Counts as a Van for Capital Allowances?

The Capital Allowances Act 2001 does not define "van" directly. Instead, s.268A defines a "car" as a mechanically propelled road vehicle, and then excludes from that definition any vehicle "of a construction primarily suited for the conveyance of goods or burden of any description" (CAA 2001 s.268A). A vehicle that meets that exclusion is not a car for capital allowances purposes and can access AIA, full expensing and the 40% FYA.

In practice, a standard panel van (Ford Transit, Vauxhall Vivaro, VW Transporter panel variant) qualifies because it is primarily built for goods. A passenger minibus or crew cab variant designed around seating does not. The test is construction and primary purpose, not simply what the vehicle is called or its payload figure.

Three vehicle types cause regular misclassification:

• Double cab pickups (DCPs): from 1 April 2025 (CT) and 6 April 2025 (IT), HMRC treats most double cab pickups as cars under s.268A because they are equally suited for passengers and goods. The previous 1,000 kg payload test no longer provides a safe harbour for new expenditure. A transitional concession kept the old van treatment for DCPs where a contract was entered before 1 April 2025 (or 6 April 2025 for income tax) and delivery occurred before 1 October 2025. For any new DCP purchase after those dates, assume car treatment and verify before claiming.
• Kombi and crew vans: a VW Transporter Kombi has passenger seats in the rear, which can push it into car territory depending on the seating configuration. Check whether the vehicle in its delivered state is primarily for goods or passengers.
• Six-seat vans: a van with more than the driver's seat plus two side seats in the cab starts to look like a passenger vehicle. A genuine goods van with a crew cab arrangement may still qualify if the load area is the dominant feature of the design, but the claim is more vulnerable to challenge.

Annual Investment Allowance on Vans

The AIA gives 100% first-year relief on qualifying plant and machinery, including vans, up to £1,000,000 per 12-month period (CAA 2001 s.38A). Cars are explicitly excluded from AIA by CAA 2001 s.38B; vans are not, so a qualifying van (new or second-hand) is fully within the AIA limit.

AIA is available to sole traders, partnerships and limited companies. It is permanent (confirmed in Finance Act 2023) at the £1,000,000 level. The allowance is time-apportioned for a period shorter than 12 months and cannot be carried forward: unused AIA in a given year is lost.

Worked example: sole trader buying a used van

A sole trader buys a second-hand diesel van for £16,000 in June 2025, using it 80% for business and 20% for personal journeys.

• Full cost: £16,000
• Business-use proportion: 80% of £16,000 = £12,800
• AIA claim: £12,800 (deducted from trading profit in 2025/26)
• Private-use portion not claimed: £3,200

At the basic rate of 20% income tax, the £12,800 deduction reduces the tax bill by £2,560. At 40% it reduces it by £5,120. The remaining £3,200 is never allowable because it relates to personal use.

Worked example: limited company buying a new van

A limited company with profits comfortably above £250,000 buys a new Ford Transit for £28,000 in October 2025. The van is used wholly for business by a member of staff (not a director with private use).

• Van cost: £28,000
• AIA claim: £28,000 (100%, no private use restriction)
• Corporation tax saving at 25%: £7,000

The van has a nil tax value after this claim. When the van is sold, the proceeds become a balancing charge (see the Disposal section below).

Full Expensing: Companies Only, New Vans Only

Full expensing (CAA 2001 s.45S) gives limited companies a 100% first-year allowance on new and unused main-rate plant and machinery, with no annual cap. It has been permanent since April 2023. A company buying a brand-new van for £40,000 can deduct the full £40,000 against corporation tax profits in the year of purchase.

Full expensing is not available to sole traders, partnerships or LLPs. Those businesses use AIA to achieve the same economic result (100% in year one), subject to the £1,000,000 limit. For most van purchases the AIA limit is not a constraint; the difference matters only if the total qualifying spend across all assets in the year exceeds £1,000,000.

The 40% First-Year Allowance from April 2026

Finance Act 2026 s.29 inserts CAA 2001 ss.45U and 45V to create a new 40% first-year allowance on main-rate plant and machinery (including vans). The 40% FYA applies to expenditure incurred on or after 1 April 2026 (corporation tax) or 6 April 2026 (income tax) on assets that are new and unused. It is available to both companies and unincorporated businesses, unlike full expensing which is company-only.

The 40% FYA covers 40% of the cost in year one; the remaining 60% enters the main pool and attracts the WDA in future years. It is therefore less generous than AIA or full expensing for the first year, but it provides an alternative where the AIA limit has already been fully used by other assets in the period.

Worked example: 40% FYA versus AIA on a new van

A sole trader buys a brand-new van for £20,000 in June 2026 (within the FA 2026 s.29 window). Their AIA limit has already been fully used by machinery purchases earlier in the year.

Using the 40% FYA (no AIA remaining):

• 40% FYA: 40% of £20,000 = £8,000 deducted in year one
• Remaining balance enters the main pool: £12,000
• Main pool WDA from 6 April 2026: 14% of £12,000 = £1,680 in year two
• Pool balance after year two: £10,320, continuing to attract 14% WDA each year

If AIA had been available, the full £20,000 would be relieved in year one. The 40% FYA is a fallback when AIA is exhausted, not a replacement for it.

The Writing-Down Allowance: 18% Falling to 14% from April 2026

Where no first-year allowance is claimed (or the asset enters the pool after a partial claim), vans in the main pool attract the main-rate writing-down allowance. That rate was 18% for many years. Finance Act 2026 s.28 amends CAA 2001 s.56 to substitute "14%" for "18%", with effect from 1 April 2026 for corporation tax and 6 April 2026 for income tax.

For a chargeable period straddling the change date, the legislation provides a time-apportioned hybrid rate. If a company's year runs from 1 January 2026 to 31 December 2026, 90 days fall before 1 April 2026 (18%) and 275 days fall on or after it (14%). The blended rate on the pool for that year is approximately 14.99% (using the formula in the Act: (18 x 90/365) + (14 x 275/365)).

The practical implication: a van sitting in the main pool without any first-year claim will receive less annual relief from April 2026 onwards. This strengthens the case for claiming AIA or the 40% FYA in year one rather than relying on pool write-down.

Rates comparison table

Allowance	Rate	New or used?	Available to	Annual cap	From
Annual Investment Allowance	100%	New or used	All businesses	£1,000,000/year	Permanent
Full expensing	100%	New only	Limited companies	None	Permanent (from Apr 2023)
40% first-year allowance (FA 2026 s.29)	40% year one, balance in pool	New only	All businesses	None	April 2026
Main pool WDA	18% (to Mar/Apr 2026) then 14%	New or used	All businesses	None	Ongoing fallback

Private Use: Sole Traders versus Limited Company Directors

The rules differ significantly depending on who owns the van. The distinction is worth understanding before the purchase, not after.

Sole traders and partnerships

A sole trader owns the van personally. Any private use requires an apportionment: only the business-use proportion of the cost qualifies for capital allowances. The same proportion applies to running costs (fuel, insurance, servicing). HMRC expects a mileage log covering a representative period (typically three months) to support the split. A log reconstructed at year end carries far less evidential weight than one kept contemporaneously.

There is no flexibility to claim 100% and then account for private benefit separately, as a company can. The restriction is built into the allowance itself.

Limited company directors

When a limited company buys a van, the company owns the asset. The company claims 100% of the capital allowances regardless of whether a director uses the van privately. The private use is accounted for through the van benefit in kind regime under ITEPA 2003, not through a restriction in the capital allowances claim.

The van benefit in kind is a flat cash equivalent, not a percentage of the van's list price. For 2025/26 the flat charge is £4,020. For 2026/27 it rises to £4,170. The director pays income tax on that amount at their marginal rate. The company pays Class 1A NIC (currently 15%) on the same figure and reports it on a P11D.

If the company also covers the cost of private fuel, an additional van fuel benefit applies: £769 for 2025/26 and £798 for 2026/27. If only business fuel is covered, no fuel benefit arises.

Compare this to a company car, where the benefit in kind is a percentage of the list price that can reach 37% for high-emission petrol cars. A van at a flat £4,020 charge is substantially more tax-efficient for a director who needs a work vehicle and accepts some private use.

Electric Vans and Zero-Emission Treatment

Electric vans qualify for AIA, full expensing and the 40% FYA in the same way as diesel or petrol vans. Unlike cars, where CO2 emissions determine the applicable WDA rate (18% or 6%) and whether a 100% FYA applies, vans face no CO2-based restrictions. An electric van and a diesel van of the same cost receive identical capital allowances treatment.

The benefit-in-kind advantage for electric vans is significant. The van benefit is charged at 0% of the cash equivalent where the van's CO2 emissions are zero. The cash equivalent for a zero-emission van for 2025/26 is therefore £0. This makes an electric van particularly efficient for a limited company director who expects private use: the company claims 100% capital allowances, and the director pays no benefit-in-kind charge.

EV charging points installed at business premises have their own capital allowances treatment (100% first-year allowance under the enhanced capital allowances regime). For that route see our guide to enhanced capital allowances for EV charging points.

Second-Hand Vans

Second-hand vans qualify for AIA in the same way as new vans. The AIA covers the full purchase cost up to the £1,000,000 annual limit. Neither full expensing nor the 40% FYA (FA 2026 s.29) applies to second-hand assets: both require the asset to be "unused and not second-hand".

For a full treatment of the rules specific to used commercial vehicles, see our dedicated guide on capital allowances on second-hand vans.

Vans versus Cars: Why the Classification Matters

Cars are excluded from AIA by CAA 2001 s.38B, excluded from full expensing, and excluded from the 40% FYA. A car enters the main pool at the WDA rate determined by CO2 emissions: 18% (now falling to 14%) for cars emitting up to 50g/km, and 6% for cars emitting above that threshold. The 6% special-rate pool for high-emission cars means full relief on a £30,000 vehicle takes over 30 years to accumulate. A van at the same cost can be fully relieved in year one.

Feature	Van (qualifies under s.268A exclusion)	Car (defined by s.268A, high-emission)
AIA available?	Yes	No
Full expensing available?	Yes (new, company only)	No
40% FYA available?	Yes (new, from April 2026)	No
Fallback WDA pool	Main pool (18%, falling to 14%)	Special-rate pool (6%)
Benefit in kind basis	Flat charge (£4,020 in 2025/26)	Percentage of list price (up to 37%)

Leased Vans

If you lease rather than purchase a van, capital allowances do not apply. Lease payments are deductible as revenue expenses in the period to which they relate. Cars with CO2 emissions above 50g/km face a 15% disallowance on lease payments; that restriction does not apply to vans. Lease payments for a van used wholly for business are fully deductible. Private use by a sole trader requires a proportionate restriction; a company director's private use is handled through the benefit-in-kind regime, not through a restriction on the company's lease deduction.

Disposing of a Van

The disposal treatment depends on whether a first-year allowance was claimed.

Where AIA or full expensing was claimed, the van carries a nil tax-written-down value in the pool. Any sale proceeds create a balancing charge in the year of disposal, added to taxable profits.

Worked example: a company claimed 100% AIA on a van costing £22,000. Three years later it sells the van for £9,500. The balancing charge is £9,500, taxable in the year of sale. At the 25% main rate, the additional corporation tax is £2,375.

Where the 40% FYA was claimed on a van costing £20,000, and the pool balance after two years of 14% WDA is approximately £8,875.20 (£12,000 x 0.86 x 0.86). If the van sells for £9,000, the proceeds of £9,000 exceed the pool balance of £8,875.20 by £124.80, creating a small balancing charge of £124.80. If the proceeds were £7,000, the pool balance of £8,875.20 would exceed them, leaving an £1,875.20 pool balance to continue attracting WDA (there is no balancing allowance unless the pool is formally wound up on cessation of business).

Plan for this when replacing vehicles. The disposal year can produce a taxable uplift that partly offsets the initial relief. For a business replacing its fleet regularly, the pool approach (using WDA rather than AIA) can smooth the timing of relief and charges, though year-one relief is still superior in most cases because of the time value of money.

Claiming in Practice: CT600 and SA103

Capital allowances on a van are claimed through the capital allowances computation in your annual tax return. For a limited company, the computation accompanies the CT600 corporation tax return, due for filing 12 months after the end of the accounting period (with corporation tax payable nine months and one day after the period end). For a sole trader, it appears on the self-employment pages (SA103) within the Self Assessment return, due 31 January after the tax year.

Keep these records for any van claim:

• Purchase invoice or finance agreement showing the full cost and the date expenditure was incurred
• V5C registration document confirming the vehicle type and ownership
• Mileage log (at least three months, kept contemporaneously) to support any business-use percentage
• Calculations showing the private-use restriction and the pool movements for each year
• On disposal: the sales invoice or scrap certificate, and the balancing charge computation

HMRC's first request in a capital allowances compliance check is typically the purchase invoice and the mileage log. Contemporaneous records are treated as more reliable than records reconstructed from diary entries or fuel receipts at year end.

How Capital Allowances Fit Your Wider Tax Position

The van allowance is one lever in a broader capital expenditure decision. If you are weighing up whether sole trader or limited company status is more efficient when you expect to spend heavily on vehicles and equipment, the structure affects how and when you get relief. Our guide on sole trader versus limited company with high capital expenditure models through the numbers, including the benefit-in-kind interaction for company directors.

For a full overview of the AIA mechanics across all types of plant and machinery, not just vehicles, our Annual Investment Allowance guide covers the limit, the pooling rules and the anti-fragmentation provisions that prevent related businesses from doubling up the £1,000,000 cap.