Vans & commercial vehicles

Conditions

• Vans and commercial vehicles qualify for the Annual Investment Allowance (AIA). The AIA allows a business to deduct up to £1 million of qualifying plant and machinery expenditure in the accounting period it is bought. Because most van purchases are well below this limit, businesses can usually deduct the entire purchase cost in year one — a stark contrast with cars, which are barred from the AIA entirely.
• For limited companies purchasing vans, full expensing (100% first-year allowance on main-rate plant) has been available since April 2023 and is now permanent. Full expensing gives the same result as the AIA for a company buying a van: 100% relief in the year of purchase, with no cap. Sole traders and partnerships cannot use full expensing but can use the AIA up to £1 million.
• From 1 January 2026, a 40% first-year allowance (FYA) is also available on main-rate plant and machinery including vans. In practice, since AIA (100%) and full expensing (100% for companies) are almost always more beneficial, the 40% FYA is mainly a fallback where the AIA has been exhausted in a period.
• Where neither the AIA, full expensing nor 40% FYA is claimed, residual value goes into the main capital allowances pool. The main pool writing-down allowance (WDA) is 14% per year from April 2026 (reduced from 18%, which applied until April 2026).
• Sole traders and partnerships must restrict any capital allowances to reflect the business proportion of use. A van used exclusively for work (for example, a dedicated tool-carrying vehicle never used for personal journeys) can be claimed in full. Mixed-use vehicles require an apportionment.
• Sole traders and partnerships using the cash basis (ITTOIA 2005 Part 2 Chapter 3A) can deduct the cost of a van as a business expense in the period it is paid — effectively 100% relief without needing to navigate the AIA or pool rules. This treatment applies to vans and other commercial vehicles but not to cars, which remain subject to capital allowances even under cash basis.
• HMRC's definition of a van matters. A vehicle must not be a 'car' within the meaning of section 268A CAA 2001. Broadly, a van is primarily designed to carry goods; a car is primarily suited for carrying passengers. Some borderline vehicles — including certain double-cab pick-ups — have been the subject of specific HMRC and court rulings. If a vehicle's classification is uncertain, seek specific advice before claiming AIA.
• If a company provides a van to an employee for private use, a separate van benefit charge arises on the employee (and a Class 1A NIC liability on the employer). This is an independent regime from the capital allowances claimed on the van's purchase — the company still claims the full allowance regardless.

Common mistakes

• Assuming a vehicle qualifies as a van without checking HMRC's definition — car-derived vans or crew-cab vehicles may be classified as cars, losing AIA eligibility.
• Failing to restrict the AIA or WDA for a sole trader's mixed private-and-business van.
• Treating a van purchase under cash basis the same as under traditional accounting — under cash basis, a van is simply expensed when paid; capital allowances are not required.

What to keep

• Purchase invoice confirming the vehicle type, registration number and price.
• V5C registration document or manufacturer specification confirming the vehicle is classified as a goods vehicle (not a car).
• Business mileage or usage records if the vehicle is also used privately.

Real-world example

A self-employed electrician buys a new transit-style van for £28,000 in September 2026, used entirely for work. He claims the AIA and deducts the full £28,000 from his trading profits in 2026/27. Had he bought a petrol car of the same price emitting 130g/km, he would receive only 6% WDA (£1,680) in year one — and would receive no AIA at all.

Frequently asked

Related allowances