As a sole trader, every penny counts.
Finding ways to reduce your tax bill while keeping your business running smoothly is key, and owning a van could be a smart move.
By taking advantage of tax reliefs like Capital Allowances, you can claim deductions on business-related expenses.
This alone does not necessarily mean that a van is right for you, and you will also need to understand how the tax rules work.
How do capital allowances help?
Capital allowances allow you to offset the cost of business assets – including vans – against your taxable income.
The main allowance to consider is the annual investment allowance (AIA), which lets you deduct 100 per cent of the van’s cost from your taxable income in the year you buy it, up to the £1 million limit. This can make a big difference in reducing your overall tax bill.
Who qualifies for the full deduction?
To claim the full cost of your van as a tax deduction, you must meet certain criteria:
Keeping detailed records of your van’s use, including the purchase price, maintenance costs, and mileage, will help ensure your claim is accepted by HM Revenue & Customs (HMRC).
What about ongoing van expenses?
Beyond the initial purchase, you can also claim tax relief on a range of running costs, including:
However, there are limitations. You cannot claim for:
If you use your van for both business and personal travel, you’ll need to split expenses accordingly.
Alternatively, HMRC allows simplified expenses, where you claim a flat rate per mile instead of tracking every individual cost.
Is van ownership the right move for you?
Owning a van as a sole trader can bring tax savings, but it requires careful financial planning and accurate record-keeping.
Keeping a clear distinction between business and personal use will be necessary to avoid issues with HMRC.