A van bought for your business is plant and machinery for tax purposes, so you can usually deduct its cost from your profits through capital allowances. Here are the main ways to do it, as they stand on GOV.UK in October 2026. Tax depends on your circumstances, so check with your accountant before you buy.
The Annual Investment Allowance (AIA)
The AIA lets a business deduct the full cost of qualifying plant and machinery from its profits in the year it buys it, up to £1 million a year. Vans qualify; business cars don’t.
- Who can claim: sole traders, partnerships where all the partners are individuals, and limited companies.
- New or used: second-hand plant and machinery can qualify, so a used van can too.
- What doesn’t qualify: something you owned for another reason before you started using it in the business, or something given to you.
Source: GOV.UK: Annual Investment Allowance.
Full expensing (companies only)
Limited companies can also claim full expensing: a 100% deduction in the year of purchase for plant and machinery bought from 1 April 2023 that is new and unused and isn’t a car. A used van doesn’t qualify. See GOV.UK: full expensing.
The 40% first-year allowance
From 1 January 2026 there’s also a 40% first-year allowance for new and unused main-rate plant and machinery (not cars). Unlike full expensing it’s open to unincorporated businesses, so it can help a sole trader or partnership that has already used up its AIA. The other 60% is then claimed through writing down allowances.
Writing down allowances
Anything you don’t claim another way goes into your main pool, which gets a writing down allowance each year: 18% before April 2026, and 14% from April 2026. It’s slower, but it’s how the cost of a van is relieved when the other allowances don’t apply.
VAT
On hire purchase you pay the VAT up front and claim it back in the normal way, with no VAT on the monthly payments. On a finance lease, VAT is added to each rental as it falls due. Our finance page explains both.
Buying an electric van?
The government’s plug-in van grant takes up to £2,500 off the price of some small electric vans and up to £5,000 off some large ones. The scheme is funded to at least April 2027, and the government says it can close without notice. You don’t claim it: the seller includes it as a discount. See GOV.UK: plug-in van grants.
Talk to your accountant first
Which allowance is best depends on your business structure, your profits and what else you’re buying this year. Your accountant can tell you which applies, and whether hire purchase or a finance lease suits your tax position better. For refrigerated vans specifically, read 100% tax relief on your next refrigerated van.
When you’ve decided, see our new and used fridge vans, or call us on 01444 245555.
