Buying a van for business

Working hard and looking for a van? It’s time to make a plan.

According to the House of Commons Library, there are 5.5 million private sector businesses in the UK - and some of these will need vans to get around and transport their goods and materials.

Running a business is expensive and nobody wants to end up paying out for something they could have avoided. With this in mind, it’s important to know the options - and what you need to consider - when looking at buying a van for your business. You should also know about the tax advantages that are available.

What to look for in a business van

There are several aspects to consider before buying a new or used business van.

• Should you buy or lease?
• Can you afford the running costs?
• Is the van you’re looking at suitable for your business needs - both now and in the future?

You’ll have a choice of electric, diesel or petrol vans but bear in mind that the government aims to phase out the sale of new petrol and diesel vehicles in 2030 and wants all new cars and vans to be 100% zero emission by 2035.

Counter in other legal requirements such as insurance, tax and the price of fuel. You should also pay attention to the size of the van. If you’re looking at one that weighs between 3,500 and 7,500kg (up to 4,250kg for electric vans), you’re going to need to get a C1 licence (unless you passed your test before 1 January, 1997). This will involve passing a medical examination, theory test and practical driving test.

How do I buy a van if I am self-employed?

The process for buying a van varies depending on the size of a business. It can sometimes be easier to buy through a company as sole traders and self-employed people may have to take out loans and work with accountants on the finer details. It’s always worth consulting with a professional before making a purchase as tax can be confusing and complex.

If you’re buying a van through a limited company, all paperwork must be filled in in the company name and payments must be made through a business bank account. Check the van is eligible to reclaim VAT before buying it.

Can I use a personal van for my business?

If you own a van and want to start using it for business reasons, you will need to declare any business-related costs while working on your tax returns, or fill in the government’s simplified vehicle expenses form using the HMRC flat rates rather than exact costs.

If you work for a limited company, driving a personal van for business usage would be treated as Benefit in Kind tax. Sometimes referred to as company car tax, this is a tax on benefits or perks provided by your employer. This means you’ll only be able to claim a portion of VAT back.

Can I claim my van as an expense against my tax bill?

If a van has been bought for business use, it counts as plant and machinery for corporation tax purposes. This means the full cost of the van will be deducted from company profits before any corporation tax is calculated. The company can also claim the full VAT on the van’s purchase price.

If your company is registered for VAT, you may also be able to claim for the following van-related costs:

• Insurance
• Fuel
• Repairs
• Servicing
• Parking
• Breakdown cover
• Vehicle licence fees

Make sure your vehicle is classed as a van for tax purposes. You can check this with the seller, the V5C logbook and via HMRC and DVLA guidelines.

Where can I buy a van for my business?

There are a number of options when it comes to buying business vans:

• Direct through manufacturers
• Local dealerships
• Leasing
• Second hand
• Hire purchase - HP is a plan where a customer agrees to buy a van outright by paying monthly installments over a fixed period of time.

If you’re thinking of buying an electric van for your company, the government offers plug-in vehicle grants that can reduce the cost by up to 35%. This is capped at £2,500 for small vans and £5,000 for larger vans.

Should I buy or lease a van?

There are several considerations when it comes to buying or leasing a van for your business.

The benefits of leasing a business van

• Monthly fee - This makes payments simple and easy to manage, with insurance and maintenance costs factored in over a fixed term.
• VAT - Claim it back on lease payments and maintenance costs.
• Potential to purchase - At the end of the lease, you can buy the van outright, return it or start a new lease for a newer model.
• Potentially more security

The disadvantages of leasing a business van

• Restrictions - There could be limits on what you use the van for, and how many miles you drive.
• No modifications - You can’t make any changes to the van*
• No early exit from your lease contract - Without paying fees!

The benefits of buying a business van

• You own the vehicle - You can do what you want with it. There are no mileage restrictions, you can add your company name to the exterior* and adapt the van to hold your equipment
• Pay less overall - If you can afford to buy the van outright or pay for it with a business loan, you could save money
• Tax advantages - Buy the van through a company and claim 100% of purchase price against capital allowance.
• Potentially more freedom

The disadvantages of buying a business van

• Extra budgetary concerns - You’ll need to make sure you have money for servicing, maintenance and insurance.
• Resale value - This is likely to fall the moment you drive the vehicle off the forecourt.

Should I buy a used van for my business?

A used van can be a very effective choice for businesses of all sizes. As long as you do your research and it’s within budget, you should be able to make the most of this addition. If you’re worried about driving a van for the first time, you can check out our guide full of hints, tips and advice.

It’s an important purchase so worth taking the time to ensure you’re making the right decision. You should look at what kind of make and model you want, check the price differences and take the vehicle out for a test drive before purchasing. You should also talk to the seller if you have any queries or concerns.

A company van can get your whole company moving in the right direction. Once you’ve bought it, you can use temporary van insurance in the short term while you consider the best options for cover.

*Please note temporary van insurance does not cover any vans with modifications.

Sources

https://www.vanwise.com/news/vans-as-company-assets-how-does-it-work/

https://for-traders.which.co.uk/advice/the-best-way-to-buy-a-van-for-your-small-business

https://www.simplybusiness.co.uk/knowledge/vehicles/how-to-buy-a-van-self-employed/

https://www.rac.co.uk/business/news-advice/advice-guides/guide-to-buying-a-van