Van & Equipment Capital Allowance Calculator
Buying a van, car, or piece of equipment for the business? The tax relief varies enormously depending on what you buy and how you buy it. A £40,000 van can be written off in full in year one, while a £40,000 high-emission car gets just 6% a year. This calculator applies the FA 2026 rules (14% main-rate writing down allowance, the new 40% first-year allowance for companies) and shows your year-one and four-year tax saving at your marginal rate.
Van & Equipment Capital Allowance Calculator
Buying a van, car, or piece of equipment for the business? The tax relief varies enormously depending on what you buy and how you buy it. A £40,000 van can be written off in full in year one, while a £40,000 high-emission car gets just 6% a year. This calculator applies the FA 2026 rules (14% main-rate writing down allowance, the new 40% first-year allowance for companies) and shows your year-one and four-year tax saving at your marginal rate.
Only used when the asset is a car. Vans and equipment ignore this.
The rate the allowance saves tax at. Companies in the £50k to £250k band save at an effective 26.5% on each marginal pound.
Sole traders and partnerships must restrict the claim for private use. Companies claim in full; a director's private use is taxed as a benefit in kind instead.
The AIA relieves the full cost in year one and beats the 40% first-year allowance whenever you have AIA headroom. The 40% FYA matters only if your total qualifying spend this year exceeds £1 million.
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How capital allowances work from April 2026
Capital allowances are how the tax system gives you relief for money spent on assets. Which allowance applies depends on the asset. The Annual Investment Allowance (AIA) gives 100% relief in year one on up to £1 million of qualifying spend per year, and it covers vans, machinery, tools, and computers, whether new or second-hand. Cars are specifically excluded from the AIA by statute.
Finance Act 2026 changed two things from April 2026. The main-rate writing down allowance fell from 18% to 14% a year (FA 2026 s.28), so relief through the main pool is now noticeably slower. In exchange, companies (not sole traders) get a new 40% first-year allowance on new, unused main-rate plant and machinery (FA 2026 s.29). In practice the AIA still beats the 40% FYA whenever you have AIA headroom, so the FYA mainly matters for companies spending over £1 million a year.
Cars follow their own CO2-based rules. A new, unused zero-emission car qualifies for a 100% first-year allowance. Cars with emissions of 1 to 50 g/km (and used electric cars) go into the main pool at 14% a year. Cars above 50 g/km go into the special rate pool at just 6% a year, which means less than a quarter of the cost is relieved even after four years.
Worked example 1: a limited company paying the 26.5% marginal rate buys a new van for £40,000. The AIA relieves the full £40,000 in year one, a tax saving of £10,600. Via the 40% FYA the year-one allowance would be only £16,000 (saving £4,240), and via the 14% writing down allowance just £5,600 (saving £1,484). Same van, same cost, a £9,116 difference in year-one tax depending on the route.
Worked example 2: a higher-rate sole trader buys a £30,000 petrol car with 120 g/km emissions, used 80% for business. It sits in the special rate pool at 6%: the year-one allowance is £1,800, restricted to £1,440 for business use, saving £605 at 42%. Over four years the cumulative saving is only about £2,210. Had they bought a new electric car for the same money, the 100% first-year allowance would save £10,080 in year one, more than four times the petrol car's four-year total.
Frequently asked questions
- Why don't cars qualify for the Annual Investment Allowance?
- Cars are excluded from the AIA by statute (CAA 2001 s.38B). Instead they get relief through first-year allowances or writing down allowances based on CO2 emissions: 100% first-year allowance for new zero-emission cars, 14% a year in the main pool for cars at 50 g/km or below, and 6% a year in the special rate pool above 50 g/km. Vans, however, count as plant and machinery and get the full AIA.
- Is a double-cab pickup a van or a car?
- From April 2025, double-cab pickups are treated as cars for capital allowances and benefit-in-kind purposes, following the Court of Appeal decision in the Coca-Cola case and the Autumn 2024 Budget. That means no AIA and CO2-based writing down allowances instead. Vehicles bought before the change kept their old treatment under transitional rules. Single-cab pickups and genuine panel vans remain plant and machinery.
- Should I use the AIA or the new 40% first-year allowance?
- If you have AIA headroom, always the AIA: it relieves 100% of the cost in year one against the FYA's 40%. The 40% first-year allowance (FA 2026 s.29) exists for companies whose total qualifying spend in the year exceeds the £1 million AIA limit. It only applies to new, unused main-rate assets bought by companies, never to cars, and is not available to sole traders or partnerships.
- Does buying second-hand change the relief?
- For vans and equipment, no: the AIA applies to new and used assets alike. For cars, yes: the 100% first-year allowance is limited to new, unused zero-emission cars, so a used electric car drops into the main pool at 14% a year. The company 40% first-year allowance is also new-assets-only.
- How does private use affect the claim?
- Sole traders and partners must restrict their claim to the business proportion: 70% business use means 70% of the allowance. Limited companies claim the full allowance regardless of who drives the vehicle, but a director or employee with private use of a company vehicle is taxed on a benefit in kind, which for high-emission cars can outweigh the corporation tax relief.
- What happens when I sell the asset?
- Sale proceeds are deducted from the relevant pool, and if you claimed 100% relief up front (AIA or a first-year allowance), the proceeds are typically taxed as a balancing charge. In effect, HMRC claws back relief on the part of the cost you recovered by selling. The allowances accelerate relief; over the asset's whole life you get relief on the true net cost.
Numbers are one thing. Getting the timing right is another.
Every figure here is modelled on standard 2026/27 thresholds. Your actual position depends on prior-year usage, pension carry-forward, other income sources, and how your decisions interact with each other. We build those models as part of our advisory work.
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