Guides · Updated 2026-10-15

Van costs for sole traders: lease, buy or mileage rate

For most trades the van is the biggest business cost after labour and materials. How you claim for it affects your tax bill every year, and some choices can't be undone for that vehicle. This guide covers the options for sole traders and partnerships without company partners. Limited companies follow different rules. Everything below is from GOV.UK, checked 15 October 2026.

Option 1: the flat mileage rate

Instead of adding up real costs, you can claim a flat rate per business mile under simplified expenses. For cars and goods vehicles such as vans, it's 55p a mile for the first 10,000 business miles in the 2026 to 2027 tax year (45p before 6 April 2026), then 25p a mile (GOV.UK). So 12,000 business miles in 2026 to 2027 gives £5,500 + £500 = £6,000.

The catches:

• You can't use it for a vehicle you've already claimed capital allowances on, or included as an expense.
• Once you use flat rates for a vehicle, you must keep using them for as long as it's in the business.
• Parking and other travel, such as train fares, can be claimed on top.

Try your own figures with the mileage allowance calculator.

Option 2: actual costs

You can instead claim the business share of what the van really costs. GOV.UK lists vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle tax and breakdown cover as allowable. You can't claim non-business driving, fines, or travel between home and work (GOV.UK).

How you claim for the van itself depends on whether you lease or buy it.

Leasing a van

Lease or hire payments are running costs ("hire charges" on GOV.UK's list), claimed as an allowable expense. You can't claim capital allowances on something you lease, unless it's hire purchase or a long funding lease, because you must own it (GOV.UK).

Buying a van

Since 6 April 2024, cash basis has been the standard way for sole traders and partnerships to work out profit (GOV.UK). Under cash basis, you claim the cost of a van as an allowable expense; cars are different and go through capital allowances (GOV.UK).

If you use traditional accounting, you claim capital allowances instead. Vans can usually go through the annual investment allowance, which lets you deduct the full cost up to £1 million; cars can't (GOV.UK). If you sell an item after claiming the allowance, you may need to pay tax. Spreading the cost through writing down allowances is also possible: the main pool rate is 14% from 6 April 2026 for Income Tax, down from 18% (GOV.UK).

VAT on vans

If you're VAT registered, cars and vans are treated differently. When a business leases a qualifying car, it normally can't recover 50% of the VAT on the lease; the block covers private use. HMRC's VAT notice lists vehicles with a payload of one tonne or more as not being cars for VAT. But fitting side windows behind the driver's seat or rear seats to a van can turn it into a car for VAT purposes (GOV.UK, VAT Notice 700/64). Check the payload and spec of a crew-cab or kombi van before you assume you can reclaim all the VAT.

Which works out better?

It depends on your mileage and costs. High mileage in a cheap, reliable van often favours the flat rate. An expensive van, or high running costs on low mileage, often favours actual costs. Because the choice sticks for that vehicle, compare both before your first tax return with it, and ask an accountant if the numbers are close.

From April 2026, many sole traders also report quarterly: see Making Tax Digital for Income Tax for the dates.

FAQ

What is the HMRC mileage rate for vans in 2026 to 2027?

55p a mile for the first 10,000 business miles, then 25p, for sole traders using simplified expenses. Before 6 April 2026 the first rate was 45p.

Can I claim my van lease payments?

Yes, the business share of hire or lease charges is an allowable expense if you claim actual costs. You can't also use the flat mileage rate for that van.

Can I claim the full cost of a van in one year?

Usually, yes. Under cash basis it's an allowable expense; under traditional accounting the annual investment allowance covers up to £1 million. Cars are treated differently.

Can I switch from the mileage rate to actual costs?

Not for the same vehicle. Once you use flat rates for a vehicle, you must keep using them while it's in the business.

Is this tax advice?

No. It summarises GOV.UK guidance checked on 15 October 2026. Check your own situation with HMRC or an accountant.