As a sole trader, your van is likely a vital asset for running your business.

However, understanding how to manage the costs associated with your van is crucial for optimising your financial strategy.

While sole traders aren’t subject to company van taxes like Benefit in Kind (BiK), there are still important expense rules and reliefs to consider to make the most of your business van.

Key considerations for sole traders

If you use your van for both business and personal purposes, you can only claim the business proportion of expenses, such as fuel, maintenance, and insurance, as allowable deductions.

Incidental private use, such as stopping for coffee during a business trip, is typically considered part of business use and does not need to be excluded from claims.

Van classification

HM Revenue & Customs (HMRC) defines a van as a vehicle designed primarily for carrying goods, with a maximum gross weight of 3,500kg.

Ensuring your vehicle meets this classification is essential to qualify for relevant reliefs.

Misclassification could lead to complications during tax reporting.

Electric vans – an eco-friendly choice

Electric vans come with financial perks, such as lower running costs, exemptions from charges like the Ultra Low Emission Zone (ULEZ), and eligibility for the Plug-in Van Grant to reduce upfront costs.

Sole traders can deduct the cost of electric vans through allowances such as the Annual Investment Allowance (AIA), offering immediate financial relief.

VAT recovery for electric vans

Sole traders can reclaim VAT on the business proportion of electricity costs when charging their electric van at home.

VAT incurred at public charging points, such as service stations, can also be reclaimed, based on the VAT rate applied to the electricity supply.

Leasing vs purchasing – what is right for you?

Lease payments for a business van can be deducted as expenses, reducing your taxable income.

Alternatively, purchasing a van allows you to claim the cost through capital allowances, such as the AIA, giving you immediate tax relief.

Your decision will depend on cash flow, the van’s expected use, and long-term financial planning.

Tips for managing van expenses effectively

• Keep accurate records – Maintain a detailed log of mileage and receipts to separate business and personal expenses clearly.
• Limit personal use – Reducing significant private use maximises your claims for business-related costs.

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

To learn more about how to optimise your van expenses, contact our team of experts today.