If you use a van for your property business, you may be able to claim capital allowances on the purchase cost. This guide explains how capital allowances on vans work for UK landlords, covering the different reliefs available and the rules that apply depending on your business structure.
What Are Capital Allowances?
Capital allowances let you deduct some or all of the value of a business asset from your profits before you pay tax [1]. For landlords, this typically applies to plant and machinery used in the property business, including vans. Instead of spreading the cost over several years through depreciation, you can claim a tax deduction in the year you buy the asset, or over time through writing-down allowances.
Vans are treated differently from cars for capital allowances purposes. Cars have complex rules with restricted allowances, but vans generally qualify for more generous relief. This makes them a tax-efficient choice for landlords who need a vehicle for their property work.
Can Landlords Claim Capital Allowances on Vans?
Yes, landlords can claim capital allowances on vans, provided the van is used for the property business. You can claim capital allowances on business vehicles, for example vans, lorries or business cars [1]. The key condition is that the van must be used for business purposes, not solely for personal use.
If you use the van partly for business and partly for private use, you can only claim capital allowances on the business proportion. For example, if you use the van 60% for property business and 40% for personal journeys, you claim allowances on 60% of the cost. You must keep records to support this split.
Note that if you are a sole trader or partnership using cash basis accounting, you can only claim capital allowances on business cars, not on vans [1]. This is a common trap. If you use cash basis, you cannot claim capital allowances on vans at all. You would instead deduct the actual running costs as expenses.
Full Expensing for Companies
For limited companies, full expensing is the most generous relief available. Full expensing allows a 100% first-year allowance for expenditure on new and unused plant and machinery, including vans, incurred between 1 April 2023 and 31 March 2026 [2]. This means you can deduct the entire cost of a new van from your company's profits in the year of purchase.
Full expensing is only available for companies, not unincorporated businesses [2]. It applies to assets that are not cars, but vans are included [2]. The van must be new and unused, second-hand vans do not qualify for full expensing [2]. The relief is available for expenditure incurred between 1 April 2023 and 31 March 2026 [2]. After that date, the government may extend or replace the scheme.
For example, if your company buys a new van for £30,000 in 2025/26, you can deduct the full £30,000 from your company's profits, reducing corporation tax by up to £7,500 (at 25% main rate) or £5,700 (at 19% small profits rate).
Annual Investment Allowance (AIA) for Unincorporated Businesses
For unincorporated businesses, sole traders and partnerships, the annual investment allowance (AIA) provides a 100% allowance on most plant and machinery, including vans, up to a limit of £1 million per year [2]. This means you can deduct the full cost of a van (up to the AIA limit) from your profits in the year of purchase.
The AIA is available for both new and second-hand vans, unlike full expensing which only applies to new assets. Motorcycles, lorries, vans and trucks are not considered cars hence can be included in the annual investment allowance [3]. The AIA limit is currently £1 million, which is more than enough for most landlords buying a single van.
If you spend more than £1 million on qualifying plant and machinery in a year, the excess goes into a pool and attracts writing-down allowances at 18% per year [3]. This is unlikely to affect most landlords, but it is worth knowing if you have a large portfolio.
Writing-Down Allowances
If you do not claim full expensing or AIA, or if your expenditure exceeds the AIA limit, you can claim writing-down allowances. For most plant and machinery, including vans, the writing-down allowance is 18% of the cost each year on a reducing balance basis [3]. This means you claim 18% of the remaining value each year, gradually writing off the cost over several years.
For example, if you buy a van for £20,000 and do not claim AIA, you claim 18% (£3,600) in year one. The remaining value is £16,400. In year two, you claim 18% of £16,400 (£2,952), and so on. This is less generous than claiming 100% upfront, but it is still a valuable deduction.
First-Year Allowances After 2026
From 1 January 2026, a 40% first-year allowance can be claimed for qualifying plant and machinery purchased after that date [1]. This is a new relief that applies to assets bought between 1 January 2026 and 31 March 2026 (the end of the current full expensing window). After 31 March 2026, the rules may change again.
This 40% first-year allowance is available for companies and unincorporated businesses. It provides a partial upfront deduction, with the remaining cost going into the pool for writing-down allowances. This is less generous than full expensing or AIA, but it still gives a significant upfront tax saving.
What About Second-Hand Vans?
Second-hand vans do not qualify for full expensing, which is only available for new and unused assets [2]. However, they do qualify for the annual investment allowance (AIA) for unincorporated businesses, and for writing-down allowances for all businesses. This means you can still claim 100% relief on a second-hand van through AIA, provided you are a sole trader or partnership and have not used up your AIA limit.
For companies, second-hand vans do not qualify for full expensing, but they can be added to the main pool and attract writing-down allowances at 18% per year. Alternatively, if the company has AIA available, it can claim 100% relief on second-hand vans through AIA (the AIA is available to all businesses, including companies, but companies may prefer full expensing for new assets).
Vans vs Cars: Key Differences
Vans are treated more favourably than cars for capital allowances. Cars have strict rules: the allowance depends on the car's CO2 emissions, and there is a cap on the cost that can be claimed. Vans, by contrast, are treated as standard plant and machinery, qualifying for full expensing, AIA, and writing-down allowances without emissions-based restrictions.
This makes vans a tax-efficient choice for landlords who need a vehicle for their property work. If you are choosing between a van and a car for your property business, the van will generally give you better tax relief. However, you must genuinely use the van for business purposes, HMRC may challenge claims if the van is mainly used for personal travel.
Practical Steps for Claiming
To claim capital allowances on a van, you need to:
- Keep the purchase invoice showing the date and cost of the van
- Record the business use percentage (if mixed use)
- Include the claim in your tax return or company tax return
- Choose the appropriate relief (full expensing, AIA, or writing-down allowances)
If you are unsure which relief applies, speak to a specialist. A property accountant can help you structure your claim correctly and ensure you maximise your tax relief.
Common Mistakes to Avoid
One common mistake is claiming capital allowances on a van when using cash basis accounting. As noted above, if you are a sole trader or partnership using cash basis, you cannot claim capital allowances on vans [1]. You must use accruals basis to claim capital allowances on vans.
Another mistake is claiming full expensing on a second-hand van. Full expensing only applies to new and unused assets [2]. If you buy a used van, use AIA or writing-down allowances instead.
Finally, do not claim capital allowances on vans that are not used for the property business. If you buy a van for personal use and occasionally use it for property work, HMRC may challenge the claim. Keep a mileage log to evidence business use.
How a Property Accountant Can Help
Capital allowances rules are detailed and change frequently. A specialist property accountant can help you navigate the rules, choose the right relief, and ensure your claim is compliant. They can also help with other tax planning, such as incorporation if you are considering moving your portfolio into a limited company.
If you need help with your property tax affairs, contact Property Tax Partners for a consultation. We specialise in property tax and can help you maximise your reliefs while staying compliant with HMRC rules.
Further Reading
For more information on property tax, see our guides on landlord tax deductions and property investment tax. You can also use our tax calculators to estimate your tax liability.
Sources
- gov.uk: Claim capital allowances: Overview - GOV.UK
- icaew.com: A lowdown on full expensing for SMEs - ICAEW.com
- accaglobal.com: Maximising capital allowances relief - ACCA Global