Buying a van or tools as a sole-trader tradesperson: what you can claim, and what a £24,000 van saves in tax

A van or a set of power tools is not a day-to-day running cost, so it is not claimed the way fuel is. GOV.UK's capital allowances page lists "equipment, machinery and business vehicles, for example vans, lorries" as plant and machinery, the kind of purchase the allowances exist for. This guide covers what the main allowance is, the rules that catch people out, and what a claim really saves on a £24,000 van.

The annual investment allowance

GOV.UK shows the annual investment allowance (AIA) at £1 million a year, and says you can claim it "on most plant and machinery up to the AIA amount". For a small trades firm that is, in practice, every van, drill, ladder and laptop bought in a year. The page lists what does not qualify:

• business cars
• items you already owned for another purpose before using them in the business
• items given to you or your business

You claim in the period you bought the item. GOV.UK dates the purchase from signing the contract if payment is due within four months, or from the payment due date if that is later. A van ordered in March and paid in May falls where the page's rule puts it, not where the key was handed over, so keep the contract and the invoice.

If you would rather not claim the whole cost at once, the page says you can claim writing down allowances instead, or split the claim between the two. That can suit a year with low profit, where a full claim would waste part of your personal allowance.

Cash basis changes the route

Most sole traders use cash basis, which GOV.UK calls "the standard way to record your income and expenses" for a sole trader or partnership without corporate partners. The capital allowances page says that on cash basis you "can only claim capital allowances on business cars". We read that to mean vans and tools on cash basis are dealt with as ordinary expenses rather than through capital allowances, but we could not confirm that from the pages we fetched. Ask your accountant which route your return uses before you buy.

One rule is certain from our own mileage guide: if you claim the flat rate for a van, you cannot also claim capital allowances for it. Read the van mileage guide before choosing, because that choice sticks to the vehicle.

What £24,000 of van saves: the working

The van costs £24,000 excluding VAT and is used 80% for work, so £24,000 x 80% = £19,200 is claimed. The 2026-27 bands on GOV.UK are a £12,570 personal allowance, 20% up to £50,270 and 40% above that.

The claim is a deduction from profit, not a refund of the price. The van still costs £24,000, so a tax saving never makes buying one free. The figures leave out National Insurance, VAT and loan interest, which all move the real answer.

Before you sign for the van

1. Put the purchase date, the contract and the invoice in the job file for the year.
2. Decide whether you will claim the flat mileage rate or the allowance, and tell your accountant.
3. Record business and private use, so the 80% is a number you can show.
4. Keep the records for the period in how long to keep invoices and records.

To see what the van repayment does to a day's earnings, use the day rate calculator.

Overlyft can set up an assistant that reads your supplier invoices and mileage log, drafts a purchases sheet by tax year with the purchase date and business-use share, and flags any asset bought before the year end. You check each line before it goes to your accountant.

This is general information, not tax advice. For a van on finance or hire purchase, a partnership or a limited company, ask an accountant.