Sole traders – Is there a benefit to van ownership?

As a sole trader, it is only natural to look for opportunities to save money and maximise your earnings.

One effective strategy is to consider buying a van, as sole traders can benefit from tax deductions on business-related expenses through Government reliefs like Capital Allowances.

Why are Capital Allowances beneficial?

Capital Allowances are the tax deductions you can claim for the cost of purchasing assets, like a van, for your business.

The allowance you should utilise when buying your van is the Annual Investment Allowance (AIA).

Under the AIA, you can deduct 100 per cent of the cost of a van from your taxable income in the year you purchase it, up to the £1 million limit.

How do I claim the full cost of my van?

To claim a tax deduction on your business van, the rules depend on whether you are self-employed or operating through a limited company:

• Self-employed – You can claim capital allowances and running costs, but if the van is used for both business and personal purposes, you must apportion the costs accordingly. Only the business-use portion can be deducted.
• Limited company – The company can claim 100 per cent of the cost through capital allowances and deduct running expenses in full. However, if the van is used for personal journeys, this may trigger a van benefit-in-kind (BIK) charge for the employee. Only zero-emission vans are exempt from this charge.

To ensure your claim is accepted, maintain detailed records of your business van expenses, including the purchase price, maintenance costs, and mileage.

Claiming ongoing expenses of van ownership

You can claim a number of allowable business expenses as part of van ownership, including:

• vehicle insurance
• repairs and servicing
• fuel
• parking
• breakdown cover

However, this can only be claimed against business journeys and cannot be claimed against:

• Travel between home and work
• Any other non-business driving
• Fines for driving or parking

In some instances, it may be easier to calculate your van expenses using simplified expenses, which offer a flat rate for mileage instead of the actual costs of buying and running your vehicle.

Owning a van as a sole trader means balancing its business benefits with proper financial planning.

To avoid discrepancies in your reports to HMRC, it is essential to maintain accurate mileage records and details of the personal use of the vehicle.

To maximise your financial benefits, get in touch with our team.