Capital Allowances on a Van in a Limited Company

Last updated: 21 October 2026 · Written by Axel

If your limited company buys a van, tools or equipment, it can usually deduct the full cost from its taxable profit in the year it bought them, using the Annual Investment Allowance (AIA). That is the short answer to capital allowances on a van in a limited company: a van, a set of tools and a laptop bought this year can all come off this year's profit, which cuts the Corporation Tax bill by 19p in every pound for a company paying the small profits rate. Cars are the big exception. Here is what qualifies, what a real claim saves, where it goes on the CT600, and the mistakes that cost people the relief.

What the Annual Investment Allowance is

Capital allowances are how a company gets tax relief on things it buys to keep and use, which HMRC calls "plant and machinery". You cannot simply put a £15,000 van through the accounts as an expense. Your accounts will depreciate it over a few years, but for tax the capital part of that depreciation is added back, and capital allowances are claimed instead.

The AIA is the most generous of them. It lets the company deduct 100% of the cost of qualifying plant and machinery in the year of purchase. According to GOV.UK's Annual Investment Allowance page, the annual investment allowance limit is £1 million for a 12-month accounting period. For a one or two person trade company, that is effectively no limit at all.

Three rules worth knowing:

• It is cut down for short periods. A 9-month accounting period gets £750,000, not £1 million.
• Companies controlled by the same person share one AIA. If you run two limited companies, they split a single £1 million between them.
• There is no new-and-unused condition. GOV.UK's AIA rules do not say the item must be new, unlike full expensing and the 40% first-year allowance, which both require plant and machinery to be new and unused. That matters if you buy a used van.

What qualifies: vans, tools and equipment

GOV.UK describes plant and machinery as items you keep for use in your business. For a trade or small business, typical examples are:

• Vans. For capital allowances, GOV.UK is clear that "lorries, vans and trucks" are not cars. A van qualifies for AIA.
• Tools. Power tools, a mitre saw, a tile cutter, test equipment, ladders and scaffold towers you own.
• Equipment. Laptops, phones, printers, machinery, van racking and shelving.

Capital allowances on tools and equipment work exactly like the van: add them up, and if the total is under the limit, the whole lot comes off this year's profit.

What does not qualify: cars, leases and gifts

Cars never get AIA, however expensive or however much you use them for work. The rates above come from GOV.UK's business cars guidance and the main rate change took effect on 1 April 2026 for Corporation Tax. Hire purchase is different from leasing: on hire purchase you can claim on the contract payments once you start using the item, but not on the interest.

You may also see "full expensing" mentioned. It is a 100% allowance for companies only, but it is limited to new and unused plant and machinery and excludes cars. For a small company buying under £1 million a year, AIA does the same job without a new-and-unused condition, so most tradesmen never need full expensing. The same goes for the 40% first-year allowance on new main rate assets bought from 1 January 2026.

A worked example: how much tax a van saves

Take a one-director plastering company paying the 19% small profits rate. Corporation Tax is 19% on profits of £50,000 or less, and 25% on profits over £250,000, per GOV.UK's Corporation Tax rates page. In between, marginal relief applies.

Profit before capital allowances: £40,000. During the year the company bought:

• a second-hand van: £16,000
• tools: £3,000
• a laptop: £1,000

That is £3,800 less Corporation Tax this year, which is the corporation tax relief for buying a van and the kit in it. The company still spent £20,000, so this is relief, not free money: you get 19p back per pound, not the whole pound.

If your profit sits between £50,000 and £250,000, marginal relief changes the sums and the saving per pound is different. If the director bought a car instead, the same £16,000 would get 14% or 6% a year, spread over many years, rather than all of it now.

Where AIA goes on the CT600

AIA is not a separate form. It sits in two places in your Company Tax Return:

1. The tax computation. This is the document that turns accounting profit into taxable profit. It adds back depreciation and deducts capital allowances. HMRC's Company Tax Return guide says you must show how you calculated capital allowances in your computations.
2. The CT600 boxes. Box 690 is the AIA included in your trading profit. Box 705 is the total allowances for the main pool, including any AIA claimed. Special rate pool allowances, such as on a higher-emission car, go in box 695.

The AIA CT600 entry only counts in the period you bought the item. GOV.UK treats the purchase date as the day you signed the contract if payment is due in less than four months, or the day payment is due if it is due more than four months later. Buy the van a week after your year end and the claim moves to next year's return.

For the wider process, see how to file your CT600 yourself, and for the dates that bite, Companies House and HMRC deadlines explained.

Common mistakes

• Claiming on a personal car. If the car is in your name, it is not the company's asset and the company cannot claim allowances on it. Even a company-owned car never gets AIA.
• Items you already owned. Items you owned before you started using them in the business do not get AIA. GOV.UK says to claim writing down allowances on them instead.
• Missing the claim. AIA can only be claimed in the period you bought the item. If you forget it and file, you may need to amend that return, so check the deadline.
• Treating depreciation as the tax relief. Your accounts depreciate the van, but for tax that capital depreciation is added back. The relief is the capital allowance.
• Two companies, two AIAs. If you control both, they share one.
• Calling a lease a purchase. You must own an asset (or buy it on hire purchase) to claim capital allowances on it.

When it needs an accountant

AIA on a van and some tools in a simple company is something you can do yourself. A micro-entity company with one year of purchases is the easy case. It gets genuinely harder, and an accountant earns their fee, when:

• You have a car. It needs a pool, a rate based on its emissions, and a balance carried forward for years.
• You have pools from earlier years. Brought-forward balances, disposals and balancing charges need working out properly.
• You sell or scrap kit you claimed on. Sale proceeds can create a balancing charge, which adds taxable profit back.
• Your company is closing, because AIA is not available in the final period.
• Leasing, mixed use or associated companies are involved.

What to do this year

1. Pull together receipts and contracts for every van, tool and piece of equipment bought in the accounting period.
2. Check the purchase date for each against your year end.
3. Separate any car from the rest. Cars do not go in the AIA claim.
4. Total the qualifying items. Under £1 million (pro rata for a short period), claim the lot as AIA.
5. Put the figure in your computation and the CT600, and file before the deadline. A late return draws an automatic penalty even if no tax is owed, as covered in our guide to late filing penalties.

Axel

Full-stack developer and founder of AXEL.TRADE, with 10+ years running businesses. Based in Manchester, building websites and the A.X.E.L platform for tradesmen and small businesses.