Van operators that lease rather than buy their vehicles outright could see a change in the economics of leasing this year, after the Government confirmed that new and unused vans bought for leasing will qualify for a 40% first-year capital allowance tax relief for the first time.
Crucially, that allowance is claimed by the leasing company or vehicle funder, and not the business using the van. Any benefit for operators is therefore indirect and depends on whether leasing providers choose to reflect the improved tax position in their pricing.
The change brings vans purchased for leasing into the accelerated capital allowances regime after decades of exclusion, correcting an obvious and long-standing imbalance between buying and leasing.
However, the same legislation also confirms a cut to the long-term writing-down allowance (WDA) used for depreciation, meaning the short-term benefit of faster tax relief comes at the expense of slower recovery over the longer term.
What has actually changing?
Expenditure on qualifying main-rate plant and machinery, including new vans purchased specifically for leasing, will now be eligible for a 40% first-year allowance (FYA).
Under the previous rules, vans bought for leasing were excluded from first-year allowances altogether. While leasing companies could still claim standard writing-down allowances, they could not access the accelerated relief available to businesses purchasing vans outright.
These changes mean that the vehicle’s owner — typically the leasing company or its funding partner — can now claim 40% of the vehicle’s cost as tax relief in year one.
From April 2026, however, the standard writing-down allowance for the main pool will fall from 18% to 14%, slowing the rate at which tax relief is recovered on the remaining balance after the first-year claim.
In simple terms, leasing companies will get faster tax relief up front, but slower relief thereafter.
Which vans qualify?
Most new leased vans will qualify, provided they are new and unused, treated as main-rate plant and machinery, and purchased for leasing within the UK.
Cars remain excluded, as do second-hand vehicles and assets leased from overseas.
For UK fleets running new leased light commercial vehicles, the change will apply at the leasing company level, but it does not create a new tax deduction for the business using the van.
Why this matters, and who actually benefits
The immediate impact of the reform is on leasing companies’ cash flow, not directly on fleet operators.
By allowing leasing providers to claim 40% of the vehicle cost as tax relief in the first year, the change improves the upfront tax position for funders compared with spreading relief over many years.
Whether that benefit feeds through to customers is a commercial decision.
In competitive parts of the market, the improved tax position may be reflected in lower rentals, keener short-term deals or more flexible contract structures. In other cases, the benefit may be absorbed by funders to offset residual-value risk, funding costs or margin pressure — particularly on electric vans.
For businesses leasing vans, nothing changes in terms of how tax relief is claimed: lease rentals remain deductible as a business expense, exactly as they are today.
What about electric vans?
The leased-van allowance sits alongside a one-year extension of 100% first-year allowances for zero-emission cars and EV charging infrastructure, now running until March 2027 for corporation tax.
While this reinforces the Government’s push to accelerate electric fleet adoption and encourage depot-based charging investment, the benefit of faster tax recovery and potentially lower lease costs must be weighed against future taxation risks — while electric vans are outside of the scope of 2028’s pay-per-mile EV road charge, for example, that may not continue indefinitely.
A quiet change
This change passed through the Budget
with relatively little attention, but it meaningfully alters the economics of van leasing.
Leased vans finally gaining access to first-year tax relief corrects a long-standing distortion, but the benefit sits with leasing companies first, not fleet operators. Whether customers see cheaper rentals will depend on how competitive the leasing market proves to be.
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