If you run a UK business and use a van, the tax relief available through capital allowances can be significant. The rules are specific, and getting them right means the difference between claiming 100% of the cost in year one versus spreading relief over many years.
This guide covers what qualifies as a van for capital allowance purposes, which allowances apply, and how to handle private use. We'll use the 2025/26 tax year figures throughout.
What Counts as a Van for Capital Allowances?
HMRC defines a van by its design and weight. A vehicle qualifies as a van if it is primarily designed for carrying goods, has a payload of at least 1,000 kg, and has no more than three seats including the driver's seat. Double cab pickups often qualify if they meet the payload test.
If the vehicle is primarily designed for carrying passengers, it is a car for capital allowance purposes regardless of what the manufacturer calls it. This distinction matters because cars have lower annual investment allowance (AIA) caps and different CO2-based restrictions.
Vans with CO2 emissions of 50g/km or less qualify for different treatment. Most diesel vans emit well above this threshold, so the standard rules apply to the vast majority of vans on UK roads.
Annual Investment Allowance (AIA) on Vans
The AIA lets you claim 100% of the cost of most plant and machinery in the year of purchase, up to a £1,000,000 annual limit. Vans qualify as plant and machinery, so you can claim the full cost of a new or second-hand van against your taxable profits in the year you buy it.
There is one catch. If the van has an element of private use, the AIA claim must be restricted to the business proportion only. We will cover that in detail below.
For a limited company buying a van for £28,000 with 100% business use, the full £28,000 can be claimed as an AIA deduction in the year of purchase. That reduces corporation tax by £5,320 at the 19% small profits rate, or £7,000 at 25%.
AIA and the Pooling Rules
Vans with 100% business use go into the main pool at 18% writing down allowance after the first year if you do not use AIA. But in practice, most businesses use AIA to claim the full cost immediately. Only if you have already used your £1,000,000 AIA limit on other assets would you fall back on the 18% pool rate.
If you buy multiple vans in the same year, the AIA covers them all as long as the total stays under £1,000,000. For most small and medium businesses, that limit is not a constraint.
Full Expensing for Limited Companies
From 1 April 2023, limited companies can use full expensing on most new plant and machinery. This gives 100% first-year relief, similar to AIA, but with no annual cap. Full expensing applies to new assets only, not second-hand purchases.
If your limited company buys a brand new van costing £35,000, you can claim the full £35,000 deduction in the year of purchase under full expensing. Sole traders and partnerships cannot use full expensing. They rely on AIA instead.
Full expensing is currently legislated as a permanent measure, so you can plan around it for the foreseeable future.
Vans with Private Use
This is where many business owners make mistakes. If you use the van partly for personal journeys, you cannot claim capital allowances on the full cost. You must restrict the claim to the business use proportion.
HMRC treats assets with private use differently depending on whether you are a sole trader or a limited company director.
Sole Traders and Partnerships
As a sole trader, the van is owned by you personally. If you use it 70% for business and 30% for private journeys, you claim capital allowances on 70% of the cost. The remaining 30% is not allowable because it relates to personal use.
You also restrict the running costs (fuel, insurance, repairs) by the same 30% private use proportion. Keep a mileage log to support your business use percentage. HMRC expects to see a record covering a representative period, typically three months.
Limited Company Directors
When a limited company buys a van and a director uses it privately, the company claims 100% of the capital allowances because the company owns the asset. The director then pays tax on the private use benefit as a benefit in kind.
The benefit in kind for a van is a flat rate of £3,960 for 2025/26. If the van emits CO2 of 50g/km or less, the benefit is reduced to zero. If the company provides fuel for private use, an additional fuel benefit of £757 applies.
This structure often works better than restricting the capital allowance claim, because the company gets full relief and the director pays a relatively low fixed benefit charge. Compare that to a car, where the benefit in kind percentage can be 37% of the list price.
Vans vs Cars: Why the Distinction Matters
Cars face much tighter capital allowance rules. Cars with CO2 emissions above 50g/km are restricted to 18% or 6% writing down allowances depending on emissions. Cars over 50g/km do not qualify for AIA at all. Cars under 50g/km qualify for 100% first-year allowances, but these are rare and expensive.
Vans avoid all of that complexity. A standard diesel van qualifies for 100% relief through AIA or full expensing regardless of its CO2 emissions. That is a major tax advantage for businesses that need a work vehicle.
If you are considering a double cab pickup, check the payload. Many modern double cabs have payloads below 1,000 kg, which means HMRC treats them as cars. The rules changed in 2024, and some previously qualifying pickups now fall into the car category.
Second-Hand Vans
Second-hand vans qualify for AIA in the same way as new vans. You claim 100% of the purchase price in the year of acquisition, subject to the business use restriction. The van must be unused for the full expensing route, but AIA covers both new and used.
If you buy a used van for £12,000 with 100% business use, you claim the full £12,000 against your profits in the year of purchase. That is a straightforward deduction.
Disposing of a Van
When you sell or scrap a van, you need to adjust the capital allowance position. If you claimed AIA on the full cost, the van has a nil tax value in the pool. Any sale proceeds are treated as a balancing charge, added back to your taxable profits.
If you sell a van for £8,000 that you fully expensed in a previous year, the £8,000 is taxable income in the year of sale. Plan for this when you replace vehicles. The balancing charge can push up your profits in the replacement year.
If you did not claim AIA and the van sits in the main pool, the sale proceeds reduce the pool balance. If the proceeds exceed the pool balance, the excess is a balancing charge.
Leased Vans
If you lease a van rather than buy it, capital allowances do not apply. Instead, the lease payments are deductible as revenue expenses. There is a 15% disallowance on lease payments for cars with CO2 emissions above 50g/km, but this restriction does not apply to vans.
Lease payments for a van are fully deductible against profits, provided the van is used for business. Private use still requires adjustment, either through a benefit in kind for company directors or a restriction on the sole trader's accounts.
Practical Steps for Claiming
To claim capital allowances on a van, include the claim in your capital allowances computation within your tax return or company tax return. For limited companies, this goes on the CT600 corporation tax return. For sole traders, it goes on the self-employment pages (SA103).
Keep the following records:
- Purchase invoice showing the van cost and date of purchase
- Mileage log covering at least three months to evidence business use percentage
- V5C registration document showing the vehicle is in your business name or your personal name
- Details of any private use adjustment calculation
If HMRC queries your claim, they will ask for the mileage log first. A contemporaneous log carries more weight than one reconstructed at year end.
Common Mistakes
The most frequent error is claiming 100% of the van cost when there is private use. HMRC routinely challenges these claims during compliance checks. If you use the van for the school run or weekend trips, you must restrict the claim.
Another mistake is treating a double cab pickup as a van when its payload is under 1,000 kg. Check the manufacturer's payload figure on the V5C. If it is below 1,000 kg, the vehicle is a car for capital allowance purposes and the less generous car rules apply.
Some businesses also forget to account for the balancing charge on disposal. If you claimed AIA on a van and then sell it three years later, the sale proceeds are taxable. Budget for this when planning vehicle replacements.
When to Speak to an Accountant
If your van use is mixed business and private, or if you are considering a double cab pickup, the rules become more nuanced. Our ICAEW qualified team at Holloway Davies can help you structure the claim correctly and avoid HMRC penalties.
We also advise on the interaction between capital allowances and the van benefit in kind for company directors. Getting this right can save thousands in tax over the life of the vehicle.
For a full overview of how capital allowances fit into your wider tax position, visit our business tax fundamentals page or contact us directly.