Sole Trader - HP on Your Tax Return
If you are a sole trader buying a van on HP, you do not deduct the monthly HP payments as expenses. Instead: claim the Annual Investment Allowance on the purchase price in the year of delivery (box 43 of SA103F); deduct the interest element of each HP payment as a finance cost; the capital repayment portion is not an allowable expense.
Sole Trader - Finance Lease or Contract Hire
On a finance lease or contract hire, deduct the full rental payment as a business expense. It is a revenue cost, not capital expenditure. No capital allowances apply because you do not own the asset.
Limited Company - Corporation Tax Treatment
The same principles apply to a limited company, but the saving is against corporation tax. For profits under £50,000, the rate is 19%. For profits over £250,000 it is 25%. A £50,000 AIA claim saves £9,500 at 19% or £12,500 at 25%.
Private vs Business Use
If a van is used for both business and private journeys, restrict your capital allowance and expense claims to the business-use proportion. HMRC expects a mileage log or similar evidence. Unlike cars (standard HMRC adjustment tables), van private use is assessed on actual usage.
Van BIK vs Car BIK
| Vehicle Type | BIK Charge 2025/26 | Method |
|---|---|---|
| Van (flat rate) | £3,960 | Flat charge regardless of value |
| Zero-emission van | £0 (currently) | Nil rate for electric vans |
| Car (e.g. £40k, 150g CO2) | ~£14,000 | Percentage of list price based on emissions |
Records HMRC Requires
Retain: the finance agreement, supplier invoices, bank statements showing payments, VAT receipts, and a mileage log if private use is possible. HMRC can investigate self-assessment returns up to 6 years after the filing deadline for innocent errors, and further for suspected fraud. Keep digital copies.