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One of the major attractions of leasing a van is the multiple tax benefits you are entitled to by choosing this method of payment.
Offset your monthly lease payments by deducting them against your taxable profits. Under HMRC rules, van-leasing payments are considered an allowable business expense, which means you can subtract them from your profits and reduce the amount of tax your business has to pay.
For businesses paying Corporation Tax, this can be particularly useful and by lowering your taxable profits, you can save up to 25% (or the applicable Corporation Tax rate) on the cost of your van lease. For a full cost breakdown, see our Running Costs guide.
If your business is VAT registered, you can claim 50% of the VAT on your van lease payments for both business and personal purposes.
However, if your van is used exclusively for business purposes, you may be able to reclaim 100% of the VAT on van leasing payments.
This can result in significant savings over the course of your lease, making it a particularly attractive option for businesses looking to manage cash flow effectively.
Many van lease agreements include maintenance packages as part of the deal. Such a package is a great way to ensure the good condition of your van during the term of your agreement and potentially retain more of its value at the end of the lease
The cost of a maintenance package is also tax-deductible as an allowable business expense, providing additional savings while giving your peace of mind that your van is well-maintained without unexpected repair costs.
Depreciation is the reduction in the value of an asset over time, particularly due to wear and tear - see the End-of-Lease guide for how depreciation is handled. Resale value is something that must be considered when buying a vehicle outright, but doesn't apply when leasing a van since you are only paying for the van's usage and there is none of the financial burden that would come with owning an asset over time.
When you lease a van, you're not purchasing a capital asset. As a result, you won't need to deal with the complexities of claiming capital allowances, such as the Annual Investment Allowance (AIA). Instead, your lease payments are straightforward operational expenses so they're easier to account for in your financial records.
Van leasing is an excellent way to budget as your monthly fee payments are fixed throughout the term of your agreement. This allows you to structure your finances in advance and because your capital isn't tied up in a depreciating asset, it will free up funds for other essential business expenses, such as growth investment and managing unexpected costs.