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Car finance ›
Is van finance tax deductible?
Updated: Monday, 31 July 2023
If you are self-employed, having a van might be a crucial part of your trade. Whether it’s to move building materials from a stockist’s yard to your client’s home or to transport gardening equipment from one job to the next, a van can help you get around and keep your business going.
One of the ways you can spread the cost when buying a new van is by purchasing it on finance. To make your purchase even more cost-effective for your business, you might be wondering if you can claim tax relief on your van finance repayments.
We can’t give financial advice, so if you are unsure about claiming van finance on your tax return, check with HMRC or seek a qualified tax accountant.
Are van finance repayments tax deductible?
A work vehicle is a vital part of the day-to-day running of your business, but buying a van for that purpose also needs to be cost-effective.
Yes, you may be able to claim tax relief on your van finance payments depending on your circumstances. You may be able to deduct either the full value or a percentage of the van finance repayments through capital allowances.
The amount you’re eligible to deduct will depend on several factors, including:
- The type of van you purchase
- How you have purchased the van (with cash, on finance, or with a lease agreement)
- Whether you intend to use it solely for business purposes
- The total taxable profit generated by your business annually
- The accounting system you use
Are the rules different for claiming car finance vs van finance?
Although HMRC classifies both cars and vans purchased for business use as plant and machinery, you can only claim part of the cost of a car against your tax bill, which is another reason many sole traders choose to invest in a van.
Business use vs personal use
The tax relief available to you will depend on whether you use the van solely for business or partly for non-work-related journeys.
If the van is used partly for business purposes and partly for personal use, according to HMRC, you must separate the capital allowances between your business and private use and only claim capital allowances for business use.
For example, if you use your van for personal journeys 25% of the time, you should reduce the capital allowances that you claim so that you are only claiming for business use. In this case, you would only be able to claim 75% in capital allowances.
HMRC criteria for claiming business-related tax relief
Self-employed individuals may be eligible for tax relief schemes to make the cost of running their own business easier to manage. In some cases, you might be able to reclaim some of the tax paid on the purchase of a vehicle, provided that you satisfy certain criteria.
If you are self-employed and aren’t sure which schemes you are eligible for, HMRC recommends you contact their self-assessment helpline.
Capital Allowances
Capital allowances are tax relief schemes that may allow your business to deduct the cost of certain assets, such as vans, from your taxable profits. There are several capital allowance options available, which we’ve outlined below:
Annual Investment Allowance
For vans, there are different rules depending on their emissions and the date you purchased the vehicle. Currently, there are two main categories for vans: those with emissions above 75 grams per kilometre and those with emissions of 75 grams per kilometre or below.
If you purchase a van with emissions above the threshold of 75 grams per kilometre, you should be able to claim a capital allowance under the Annual Investment Allowance. This may allow you to deduct the full cost of the van from your taxable profits in the year of purchase up to a specified limit. The limit is currently £1,000,000 as of July 2023.
Depending on the type of van finance you have, you may be able to claim for the payments you have not yet made once you start using the van. However, you usually can’t claim on the interest payments or any charges that arise during your agreement.
This may vary depending on your circumstances, and it’s important to know that we can’t give you financial advice. If you aren’t sure how much you can claim, seek help from a qualified tax professional.
If you sell the van after claiming Annual Investment Allowance, you may need to pay tax depending on your circumstances.
First Year Allowance
If you purchase a van with emissions at or below the threshold of 75 grams per kilometre, it is considered to be a ‘low-emission’ van. For low-emission vans, you may be eligible for the First Year Allowance. This may allow you to claim 100% of the cost of the van as a deduction from your taxable profits in the year of purchase.
You can find more information about the First Year Allowance on GOV.UK.
How to claim van finance on your tax return
We can’t give financial advice. Everyone’s circumstances are different, so if you are unsure, contact HMRC or seek a qualified tax accountant.
The most common ways include:
- Sole trader: you can claim capital allowances on your self-assessment tax return
- Business partnership: you can fill out a partnership tax return
- Limited companies: usually complete a company tax return with separate capital allowance calculations.
Are there other van expenses that are deductible in the UK?
If you are not eligible to claim the full cost of the van, there are some vehicle expenses that you may be able to claim, such as:
- Fuel
- Breakdown cover
- Vehicle insurance
- MOTs
- Repairs and servicing
FAQs about claiming van finance on your tax return
Yes, under the Annual Investment Allowance, limited companies may be eligible for a deduction of 100% of the cost to reduce your company’s profits before tax. For full information, see the HMRC guide.
Van manufacturers know that buyers want a van they can use as their personal mode of transport as well as a tool for their business. Therefore, some models are designed with style and comfort in mind over practicality, which is the opposite of what HMRC classifies a van as.
HMRC defines a van or light goods vehicle (LGV) as:
- A vehicle primarily constructed for the conveyance of goods or burden
- A gross vehicle weight – fully laden – not exceeding 3,500kg
If you are unsure how a vehicle is classified, you can check its logbook. A vehicle with the classification N1 or N2 is taxed as a van, while cars are classified as M1 or M2. Car-derived vans (goods vehicles which are constructed or adapted as a derivative of a passenger vehicle) are classified as such under ‘body type’ in the vehicle’s registration document (VC5).
There is a list published by HMRC which shows their classifications of some car-derived vans and combi vans to help you determine whether yours is classified as a car or van for tax purposes.
If you aren’t sure whether or not your van qualifies for the purposes of tax relief, seek help from HMRC or a qualified tax professional.
Yes, you may be able to claim the full cost of buying a van as an expense against your tax bill if your vehicle falls within the criteria for HMRC capital allowances.
Yes, you can claim for van finance if you’re self-employed, as long as you meet the criteria. You should be able to claim your van finance payments as expenses on your self-assessment tax return. Guidance on claiming expenses on tax returns is available on GOV.UK.
Completing this is a legal requirement for any self-employed individuals earning more than £1,000 per year. If you are unsure about whether you need to send a self-assessment tax return, check using the Government’s online form.
If you are self-employed, having a van might be a crucial part of your trade. Whether it’s to move building materials from a stockist’s yard to your client’s home or to transport gardening equipment from one job to the next, a van can help you get around and keep your business going.
One of the ways you can spread the cost when buying a new van is by purchasing it on finance. To make your purchase even more cost-effective for your business, you might be wondering if you can claim tax relief on your van finance repayments.
We can’t give financial advice, so if you are unsure about claiming van finance on your tax return, check with HMRC or seek a qualified tax accountant.
Are van finance repayments tax deductible?
A work vehicle is a vital part of the day-to-day running of your business, but buying a van for that purpose also needs to be cost-effective.
Yes, you may be able to claim tax relief on your van finance payments depending on your circumstances. You may be able to deduct either the full value or a percentage of the van finance repayments through capital allowances.
The amount you’re eligible to deduct will depend on several factors, including:
- The type of van you purchase
- How you have purchased the van (with cash, on finance, or with a lease agreement)
- Whether you intend to use it solely for business purposes
- The total taxable profit generated by your business annually
- The accounting system you use
Are the rules different for claiming car finance vs van finance?
Although HMRC classifies both cars and vans purchased for business use as plant and machinery, you can only claim part of the cost of a car against your tax bill, which is another reason many sole traders choose to invest in a van.
Business use vs personal use
The tax relief available to you will depend on whether you use the van solely for business or partly for non-work-related journeys.
If the van is used partly for business purposes and partly for personal use, according to HMRC, you must separate the capital allowances between your business and private use and only claim capital allowances for business use.
For example, if you use your van for personal journeys 25% of the time, you should reduce the capital allowances that you claim so that you are only claiming for business use. In this case, you would only be able to claim 75% in capital allowances.
HMRC criteria for claiming business-related tax relief
Self-employed individuals may be eligible for tax relief schemes to make the cost of running their own business easier to manage. In some cases, you might be able to reclaim some of the tax paid on the purchase of a vehicle, provided that you satisfy certain criteria.
If you are self-employed and aren’t sure which schemes you are eligible for, HMRC recommends you contact their self-assessment helpline.
Capital Allowances
Capital allowances are tax relief schemes that may allow your business to deduct the cost of certain assets, such as vans, from your taxable profits. There are several capital allowance options available, which we’ve outlined below:
Annual Investment Allowance
For vans, there are different rules depending on their emissions and the date you purchased the vehicle. Currently, there are two main categories for vans: those with emissions above 75 grams per kilometre and those with emissions of 75 grams per kilometre or below.
If you purchase a van with emissions above the threshold of 75 grams per kilometre, you should be able to claim a capital allowance under the Annual Investment Allowance. This may allow you to deduct the full cost of the van from your taxable profits in the year of purchase up to a specified limit. The limit is currently £1,000,000 as of July 2023.
Depending on the type of van finance you have, you may be able to claim for the payments you have not yet made once you start using the van. However, you usually can’t claim on the interest payments or any charges that arise during your agreement.
This may vary depending on your circumstances, and it’s important to know that we can’t give you financial advice. If you aren’t sure how much you can claim, seek help from a qualified tax professional.
If you sell the van after claiming Annual Investment Allowance, you may need to pay tax depending on your circumstances.
First Year Allowance
If you purchase a van with emissions at or below the threshold of 75 grams per kilometre, it is considered to be a ‘low-emission’ van. For low-emission vans, you may be eligible for the First Year Allowance. This may allow you to claim 100% of the cost of the van as a deduction from your taxable profits in the year of purchase.
You can find more information about the First Year Allowance on GOV.UK.
How to claim van finance on your tax return
We can’t give financial advice. Everyone’s circumstances are different, so if you are unsure, contact HMRC or seek a qualified tax accountant.
The most common ways include:
- Sole trader: you can claim capital allowances on your self-assessment tax return
- Business partnership: you can fill out a partnership tax return
- Limited companies: usually complete a company tax return with separate capital allowance calculations.
Are there other van expenses that are deductible in the UK?
If you are not eligible to claim the full cost of the van, there are some vehicle expenses that you may be able to claim, such as:
- Fuel
- Breakdown cover
- Vehicle insurance
- MOTs
- Repairs and servicing
FAQs about claiming van finance on your tax return
Yes, under the Annual Investment Allowance, limited companies may be eligible for a deduction of 100% of the cost to reduce your company’s profits before tax. For full information, see the HMRC guide.
Van manufacturers know that buyers want a van they can use as their personal mode of transport as well as a tool for their business. Therefore, some models are designed with style and comfort in mind over practicality, which is the opposite of what HMRC classifies a van as.
HMRC defines a van or light goods vehicle (LGV) as:
- A vehicle primarily constructed for the conveyance of goods or burden
- A gross vehicle weight – fully laden – not exceeding 3,500kg
If you are unsure how a vehicle is classified, you can check its logbook. A vehicle with the classification N1 or N2 is taxed as a van, while cars are classified as M1 or M2. Car-derived vans (goods vehicles which are constructed or adapted as a derivative of a passenger vehicle) are classified as such under ‘body type’ in the vehicle’s registration document (VC5).
There is a list published by HMRC which shows their classifications of some car-derived vans and combi vans to help you determine whether yours is classified as a car or van for tax purposes.
If you aren’t sure whether or not your van qualifies for the purposes of tax relief, seek help from HMRC or a qualified tax professional.
Yes, you may be able to claim the full cost of buying a van as an expense against your tax bill if your vehicle falls within the criteria for HMRC capital allowances.
Yes, you can claim for van finance if you’re self-employed, as long as you meet the criteria. You should be able to claim your van finance payments as expenses on your self-assessment tax return. Guidance on claiming expenses on tax returns is available on GOV.UK.
Completing this is a legal requirement for any self-employed individuals earning more than £1,000 per year. If you are unsure about whether you need to send a self-assessment tax return, check using the Government’s online form.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
