If you run a UK agency and you have bought a second-hand van for business use, you need to understand how capital allowances work. The rules are different from those for cars, and they are different again for new versus used vehicles. Get this right and you can reduce your corporation tax bill significantly. Get it wrong and you leave relief on the table.
This article covers exactly how capital allowances on second hand vans apply to agency founders. We will look at the Annual Investment Allowance (AIA), writing-down allowances, and the key distinction between vans and cars. We will also cover what happens if you use the van partly for private journeys.
What Are Capital Allowances?
Capital allowances let you deduct the cost of certain business assets from your profits before you pay tax. They are not the same as depreciation in your accounts. Depreciation is an accounting adjustment. Capital allowances are a tax relief. You claim them on your tax return or company tax return (CT600).
You can claim capital allowances on equipment, machinery, and business vehicles, including vans, lorries, and business cars [1]. For most agency founders, the relevant assets are laptops, office furniture, software, and vehicles used for client visits, equipment transport, or site work.
The value of the item is typically what you paid for it [1]. If you bought a second-hand van for £12,400, that is the figure you use for your claim.
Vans vs Cars: Why the Distinction Matters
For capital allowances, a car is defined as a vehicle that is suitable for private use and was not built primarily for transporting goods [2]. Vans, by contrast, are built for carrying goods. Motorcycles, lorries, vans, and trucks do not count as cars for capital allowances purposes [2].
This distinction matters because vans qualify for more generous relief than cars. Specifically, vans qualify for the Annual Investment Allowance (AIA) and, in some cases, first-year allowances. Cars generally do not qualify for AIA and are restricted to writing-down allowances at either 18% (main rate) or 6% (special rate) depending on CO2 emissions.
If you run a digital agency in Manchester Northern Quarter and you buy a second-hand van to transport equipment to client shoots, that van is a van for tax purposes. If you buy a second-hand SUV and use it to visit clients, HMRC may treat it as a car. The distinction is factual, not based on what the manufacturer calls it.
Capital Allowances on Second Hand Vans: The Core Rules
Second-hand vans qualify for the Annual Investment Allowance (AIA) [3]. The AIA gives you 100% relief on qualifying plant and machinery expenditure up to £1 million per year [1]. That means you can deduct the full cost of the van from your profits in the year you buy it.
There is a catch. The AIA applies to second-hand vans only if they are unused and not previously owned by the claimant [3]. In practice, this means a genuinely second-hand van that you buy from a dealer or private seller qualifies for AIA. A van that you previously owned personally and then transferred into your company does not qualify for AIA on that transfer.
If you cannot claim AIA, or if you have already used your £1m AIA limit for the year on other assets, you claim writing-down allowances instead. For second-hand vans, the main rate writing-down allowance of 18% per annum applies [3]. You claim 18% of the cost each year on a reducing balance basis.
Full expensing, which gives a 100% first-year allowance, is available for new and unused plant and machinery only [3]. It does not apply to second-hand vans. So do not confuse full expensing with AIA. AIA is your route to 100% relief on second-hand vans.
Example: AIA Claim on a Second-Hand Van
You run a 12-person creative agency in Bristol Harbourside. You buy a second-hand van for £14,700 to transport props and equipment to client shoots. Your company has not used any of its £1m AIA allowance this year.
You claim the full £14,700 as a capital allowance in the year of purchase. At 19% corporation tax (small profits rate), that saves you £2,793 in tax. At 25% (main rate), it saves you £3,675.
Example: Writing-Down Allowance on a Second-Hand Van
Same van, same agency. But you have already used your £1m AIA allowance on new office equipment and software. You cannot claim AIA on the van.
You claim 18% writing-down allowance instead. In year one, you claim £2,646 (18% of £14,700). The remaining value carried forward is £12,054. In year two, you claim £2,170 (18% of £12,054). And so on.
This is slower than AIA, but it still gives relief over time. If you expect to buy significant assets in future years, you might choose to save your AIA for those and use writing-down allowances on the van instead.
Private Use of a Van: What Changes
If you use the van partly for private journeys, you cannot claim capital allowances on the private-use proportion. You restrict your claim to the business-use percentage.
For example, you buy a second-hand van for £10,000. You use it 70% for business and 30% for personal trips. Your capital allowance claim is based on £7,000 (70% of £10,000), not the full £10,000.
This applies whether you claim AIA or writing-down allowances. Keep a mileage log. HMRC can and does ask for evidence of business versus private use.
Sole Traders and Partnerships: A Special Rule
If you are a sole trader or partnership and you use the cash basis of accounting, you can only claim capital allowances on business cars [1]. Vans are not included in that exception. So if you are a sole trader web designer turning over £65k and using cash basis, you cannot claim capital allowances on a van.
You can still deduct the running costs (fuel, insurance, repairs) based on business mileage. But the purchase cost is not relievable through capital allowances. If you are on the accruals basis, the normal rules apply.
Most agency founders operate through a limited company, so this rule affects a minority. But if you are a sole trader or partnership, check your accounting basis before claiming.
Electric Vans: A Different Story
Electric vans are treated more generously. New and unused electric vans with CO2 emissions of 0g/km bought from April 2021 qualify for 100% first-year allowances [2]. That means full relief in year one, regardless of AIA.
Second-hand electric vans bought from April 2021 qualify for main rate allowances, not 100% first-year allowances [2]. So the same rules apply as for second-hand petrol or diesel vans: AIA or 18% writing-down allowances.
If you are considering an electric van for your agency, the tax position is better on a new one. But second-hand electric vans still give you relief through AIA, which is still 100% in year one.
Double Cab Pick-Ups: A Recent Change
Double cab pick-ups have historically been treated as vans for capital allowances. That changed in 2025. From 1 July 2025, double cab pick-ups with a payload of one tonne or more are treated as cars for tax purposes [4].
This affects capital allowances, benefit-in-kind, and fuel benefit. If you are considering a double cab pick-up for your agency, check the date of purchase and the payload. The rules have shifted.
How to Claim Capital Allowances on Second Hand Vans
For a limited company, you claim capital allowances in your company tax return (CT600). The claim goes in the capital allowances computation, which forms part of the tax return. Your accountant will prepare this as part of your year-end accounts.
For a sole trader or partnership, you claim on your self-assessment tax return (SA100). There is a specific section for capital allowances.
You need to keep records of the purchase: the invoice, proof of payment, and details of the vehicle (make, model, registration, date of purchase). If you claim AIA, note that on your computation. If you claim writing-down allowances, track the reducing balance each year.
If you use accounting software like Xero or QuickBooks, your accountant can tag the van as a fixed asset and run the capital allowances calculation from there. Do not just expense the van as a cost. That is incorrect and could trigger an HMRC enquiry.
Common Mistakes Agency Founders Make
Here are the errors I see most often:
- Treating a van as a car. If the vehicle is built for goods, it is a van. If it is a car-derived van (like a Ford Fiesta van), it is still a van for capital allowances. Check the V5C registration document.
- Claiming full expensing on a second-hand van. Full expensing is for new assets only. Use AIA instead.
- Ignoring private use. If you use the van for personal trips, restrict your claim. HMRC can ask for mileage logs.
- Not claiming at all. Some agency founders simply expense the van as a cost. That is wrong and loses relief. Capital allowances are more generous.
- Assuming AIA is automatic. You must elect for AIA on your tax return. If you do not, the default is writing-down allowances.
When to Speak to Your Accountant
If you have bought a second-hand van in the current financial year, ask your accountant before your year-end. The timing of the claim matters. If you have already used your AIA limit, you need to plan which assets get the AIA and which go into the writing-down pool.
If your agency is structured as a limited company and you are considering a van purchase, factor the capital allowances into your cash flow planning. A £15,000 van could save you £3,750 in corporation tax at 25%. That changes the real cost.
If you are a sole trader on cash basis, check whether you can claim at all. If not, consider switching to accruals basis if it makes sense for your wider tax position.
At Agency Founder Finance, we are ICAEW qualified accountants who work exclusively with agency founders. We handle capital allowances, corporation tax, and all the other tax compliance that comes with running a growing agency. If you need advice on a van purchase or any other asset, get in touch.
We also work with marketing agencies, digital agencies, and creative agencies across the UK. The rules are the same, but the context matters. A van for a PR agency in Soho is a different proposition from a van for a web design agency in the Lake District. We can help you apply the rules to your specific situation.