How much can you claim for a van? A self-employed special

Kirsty Young Advice and Tips, Freelancers

Many self-employed business owners wonder about the most tax-efficient way to buy a van.

In this blog, we focus solely on how this works for the self-employed or sole trader. If you have a limited company, the rules are a little different.

It’s also worth noting that cars are treated differently to vans (good vehicles).

 

A reminder of your options when claiming travel

Before we talk about the cost of the van itself, here are the two ways in which you can claim for travel expenses as a self-employed business owner.

You can either:

  • Claim fixed rate mileage rates for the business journeys you do

OR

  • Claim the actual costs of your motor expenses, potentially disallowing an amount for any personal use

If you would like to claim some of the value of your van, then you need to be using the second option.

 

Reclaiming the whole cost of the van

How and what you can reclaim depends on how you acquired your van.

PURCHASE If you purchase a van outright or via a loan, it is likely you will be able to claim ‘capital allowances’ on the total cost of the van as part of your ‘Annual Investment Allowance’). This allows you to reduce your profit by the entire value of the van in the year you bought it.

For example, if you had £30,000 profit, and bought a van for £30,000, you’d have no profit and therefore no tax to pay.

As a reminder though, this doesn’t make the van ‘free’. It just makes it tax deductible. For more on this read our blog on what tax deductible actually means.

Without getting too technical, there is also a second way to claim it without capital allowances that effectively works the same way (more details below).

LEASE: If you lease your van, you just count the monthly rental/lease charges as an expense, which are still generally tax deductible. The difference is you are only getting relief on the cost of the year’s charges.

 

How to claim the cost of your van

Claims are made in your tax return by filling in certain boxes. Where there are two ways to prepare your accounts, what’s known as ‘cash’ or ‘accruals’ basis, the boxes you would fill in are different.

  • The ‘accruals’ basis is the traditional way of accounting and is effectively based on dates. Presuming you bought the van, you would usually then be filling in the capital allowances boxes to claim the cost of the van.
  • If you bought the van and are using the ‘cash basis’, you simply claim the cost like you would any other expense, and adding it in the relevant box on your tax return’s self-employment pages.

 

What about if I then sold the van?

If you have claimed the 100% ‘capital allowance’ or expense on a van, then when you sell it you likely be charged some tax on the value of the money you receive for it.

There isn’t some odd loophole where you can buy it one year and sell it the next and not pay any tax (a common question!).

 

OK, you say a ‘van’, but what about a double cab pickup?

Double cab pick-ups are attractive for many business owners as an alternative to the more tradition Transits or similar vans. However, in order to qualify as a ‘van’ as described in the options above, your double cab pickup would need to have a ‘payload’ of at least one tonne.

 

A quick word on vans and VAT

If you are VAT registered, it is likely that you will be able to reclaim VAT on your van.

  • If you lease it, you should be able to reclaim VAT on the rental payments.
  • If you buy it outright, you should be able to reclaim VAT on the purchase invoice.

 

A reminder on tax being taxing

As with all things tax, van purchase is a highly technical area. There are various caveats to the content of this blog, particularly when considering any van finance agreements (such as ‘PCPs’) and how they might give tax relief (or not). With this in mind you should seek professional advice if you are in any doubt about your claim.

If you don’t have an accountant to ask, or feel your current accountant isn’t being as helpful as they might about business equipment purchases and what’s deductible, we’d love a chat about how we can help.