Is Van Finance Tax Deductible?

One of the most common questions we get asked by potential customers is 'Is van finance tax deductible?'. The good news is that you’ll find the answer in this guide.

In some cases, you may find that financing a business van is tax deductible, but, to be eligible, there are some stipulations you must adhere to. Here, we'll take a detailed look into business vehicle tax deductions, aiming to give you all the information you need to make the right decision for your needs.

If you'd like to get a business van finance quote, just click the 'Get my quote' button and we'll find you an offer in no time.

Understanding the tax advantages of van finance

The good news is that you can get tax relief on van finance if your van is used as a commercial vehicle - regardless of the size of your business. 

If you're a business owner or classed as self-employed, any company van can be classed as a commercial vehicle, so long as it's used solely for business purposes. If you own your van outright or you have a Hire Purchase (HP) agreement (leading to ownership of your van at the end of the contract), your van can be classed as a business asset, which opens up a world of tax benefits. 

Business vans are eligible for capital allowances, meaning that some (or all) of their value can be claimed back as tax relief from HMRC. Your tax relief doesn't end with capital allowances though, as you can also claim a range of other costs back as allowable business expenses.

Allowable business expenses include:

• Car tax and insurance

• Parking charges

• Repair and maintenance fees

• Fuel

• MOTs

• Breakdown cover and roadside assistance

• Hire charges

• Vehicle licence fees

The cost of travelling to and from work is not covered (unless it's a temporary place of work), and you cannot claim for non-business driving costs and fines.

You may also find yourself questioning 'How much can I claim for my van self-employed?' This isn't something we can state for definite, as it will depend on your own personal circumstances. However, the UK government advises that you can calculate your van expenses using a flat rate (known as simplified expenses) for mileage instead of working out the actual cost of buying and running your vehicle.

Can I get tax breaks if my van is used for personal use?

The short answer is no. Unfortunately, your van is only tax deductible if you're self-employed/a sole trader and your van is used as a business van.

However, if your company van is only partly used for personal use, you may still be able to claim capital allowances for the periods of business use. To do this, you'll need to calculate the capital allowance difference between personal and business use. Once calculated, you can then claim for the proportion used for your company. It's important to keep receipts for anything you'd like to claim for, including fuel and repairs.

If you do try to claim tax relief for instances when your van has been used for personal use, you could be breaking the law. If in doubt, it’s best to contact HMRC or speak to your accountant.

HMRC criteria for business-related tax relief 

When claiming tax relief on your business van, there is a set criteria set forward by HMRC that you must adhere to:

• You must be classed as either self-employed or a sole trader, and your company van must be used primarily for business purposes. You may even be able to claim some of the tax paid on your finance deal. 

• You'll need to have been trading legally for a minimum of two years

• Your limited company needs to be officially registered with a company registration number.

• You’ll need to declare that your van is being used for business purposes and be honest about how often it's driven for personal use. 

• You'll also need to log your mileage at the start and end of the tax year, enabling you to give an accurate report when making a claim.

As a self-employed worker, you may even be able to claim some of the tax paid on your finance deal.

If you still have questions about eligibility, you can contact the HMRC's self-assessment helpline here.

How can I claim tax relief on van finance?

If you want to claim van finance on your tax return, there are several avenues you can go down. 

The most common ways to claim are as follows:

• Limited companies can complete a company tax return in which you can separate your capital allowance calculations

• Sole traders can claim capital allowances on a self-assessment tax return

• Business partnerships can complete a business partnership tax return

At Car Finance 247, we are unable to give financial advice, so if you have any further queries, you may want to speak to your accountant or HMRC. 

Other van expense deductions to be aware of

As well as capital allowances and allowable business expenses, sole traders and self-employed workers may also be able to claim several other deductions from their tax returns. 

These forms of tax relief include:

• Annual investment allowance - If your van emits emissions above 50 grams per kilometre, you may be able to claim a capital allowance under your annual investment allowance. You may be able to deduct some (or all) of the cost of your van from your taxable profits in the year of purchase. You may also be able to claim for business van finance payments that haven't been made yet, although interest usually isn't included.

• First year allowance - If your van emits emissions under 50 grams per kilometre, it's classed as a low-emission vehicle and you may be eligible for a first year allowance. This means that the entire cost of your van can be deducted from your taxable profits in the year of purchase, including future finance payments.

• VAT relief - Businesses can claim full VAT relief on vans (cars are not eligible) used for business purposes, although you cannot claim tax relief for personal trips.

Even if your van is used for personal purposes, you can technically get electric van tax relief if it's an electric vehicle. As electric vehicles do not produce emissions, they are currently exempt from VED (otherwise known as road tax).

Get in the driver’s seat with Car Finance 247

We hope that after reading this guide, the answer to the question ‘Is van finance tax deductible?’ has been sufficiently answered. As you can see, there are many different tax relief options available if you use your van for business purposes, which may help you to save money in the long run. 

If you’d like to find out more about the van financing process, please visit our How It Works page. Alternatively, you can also use our handy car finance calculator to find out how much you could borrow.

Got a question? Get in touch with our helpful team. Otherwise, you can request a van finance quote by clicking the ‘Get my quote’ button.