- New vans bought for leasing now qualify for a 40% first-year capital allowance
- Allowance is claimed by leasing company or vehicle funder
- Means the allowance is NOT claimed by the business using the van
- But could ultimately mean lower pricing and better deals
Van operators that lease rather than buy outright could see a shift in the economics of leasing this year.
It comes after the Government confirmed that new vans bought for leasing now qualify for a 40% first-year capital allowance.
It’s an important change, but also one that’s easy to misunderstand. The allowance is claimed by the leasing company or vehicle funder, not the business using the van. Any benefit for operators is therefore indirect and relies on leasing providers choosing to reflect their improved tax position in lower pricing.
Here comes the taxing bit
For the first time, vans purchased for leasing have been brought into the accelerated capital allowances regime, resolving a long-standing imbalance between buying and leasing that had persisted for decades. Until now, leasing companies have been locked out of first-year allowances altogether, even though businesses buying vans outright can access much faster tax relief.
Expenditure on qualifying main-rate plant and machinery, including new vans purchased specifically for leasing, is now eligible for a 40% first-year allowance.
That means the vehicle’s owner, which is typically the leasing company or its funding partner, can now claim a significant portion of the vehicle’s cost as tax relief in year one.
But the tax reform also comes with a trade-off
From the new financial year in April, the standard writing-down allowance for the main pool falls from 18% to 14%, slowing the rate at which the remaining balance is relieved.
What does that mean? Leasing companies get faster tax relief up front, but slower recovery thereafter.
Most new leased vans will qualify, provided they are new, treated as main-rate plant and machinery, and purchased for leasing within the UK. Cars remain excluded, as do second-hand vans and assets leased from overseas.
For fleets running new leased light commercial vehicles, the change applies at the leasing company level and does not create a new tax deduction for the business using the van.
The immediate impact of the update is therefore on leasing companies’ cash flow, rather than directly in to an operators pocket.
By improving the upfront tax position for funders, the change may feed through into lower rentals. Equally, some providers may choose to absorb the benefit to mitigate residual-value risk, particularly in the electric van market.
The change passed through the Budget with relatively little attention. While leased vans are finally gaining access to first-year tax relief, which corrects a clear distortion in the system, the benefit sits with leasing companies first.
What this means if you’re about to lease a van
The new tax rules won’t change how you claim tax relief. The 40% first-year allowance is claimed by the leasing company, not the business using the van, and lease rentals remain deductible as a normal business expense.
However, because leasing providers can now recover tax relief more quickly on new vans, some may choose to reflect that in pricing. This could mean slightly lower rentals, keener short-term deals, or more flexible contracts — though any savings are not guaranteed.
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