Thinking about leasing a van for your business? Good call! Leasing a van isn’t just about getting a reliable set of wheels; it’s also packed with tax perks that can help you save money. In this guide, we’ll break down everything you need to know about van leasing and taxes – without the confusing jargon. Let’s get straight into how leasing a van can benefit your business and keep things simple, practical, and easy to understand.
Key Takeaways
- Why leasing a van is a smart move for tax savings
- The tax benefits of van leasing in a nutshell
- Other van tax essentials to keep in mind
- Van leasing options to consider
- Frequently asked van leasing tax questions
- Take the First Step to your perfect van lease
Why leasing a van is a smart move for tax savings
Leasing a van is pretty straightforward: instead of buying it outright, you’re renting it for a set amount of time, usually 2-5 years. During that time, you’ll pay a monthly fee, and in return, you’ll get a reliable van to keep your business moving. The best part? Leasing comes with some nice tax benefits, especially if you’re VAT-registered or a limited company. You’re basically getting tax savings while keeping more cash in your pocket for other parts of the business. Here’s how it all works.
The tax benefits of van leasing in a nutshell
Now, let’s talk savings. Here are the main tax perks you can expect when you lease a van:
- Monthly lease payments are tax-deductible: Your monthly lease payments for business use are tax-deductible. This means you can take away these costs from your company’s taxable profits, lowering your corporation tax bill. In simple terms, these leasing costs become like any other business expense (such as office supplies or rent), and they reduce what you owe in taxes.Example: Say you’re paying £400 a month to lease a van, that £400 per month reduces your taxable profit, saving you money on your annual corporation tax. Simple but effective!
- VAT recovery for VAT-registered businesses: If your business is VAT-registered, you’re in for a treat. You can reclaim some or all of the VAT on your lease payments. If you’re using the van purely for business, you can typically reclaim 100% of the VAT. However, if you’re also using it for personal errands or commutes, you can still reclaim 50% of the VAT on the monthly payments.Quick tip: It’s best to keep personal use to a minimum to maximise VAT recovery. The more the van is used for business only, the more VAT you can reclaim.
- Benefit-in-kind (BIK) tax for personal use: Using a company van for personal journeys, like running errands or weekend trips, triggers something called Benefit-in-Kind (BIK) tax. The good news? BIK tax on company vans is much lower than on company cars, and it’s set at a fixed rate. This makes it easier to budget for, and it’s often worth it if you’re not doing too much personal driving.For employers, there’s also a Class 1A National Insurance contribution on the BIK amount. So, keeping the van strictly for business use could save on tax, but if a few personal trips happen, the tax rate for BIK is usually manageable.
Other van tax essentials to keep in mind
Road tax (Vehicle Excise Duty)
Road tax, or Vehicle Excise Duty (VED), is the yearly tax you pay to keep your van on the road. First Step always includes the first year of road tax with our cheap van lease deals, but it’s worth checking your own lease agreement to be sure. Road tax costs vary based on your van’s emissions and registration date, but this usually isn’t something you have to worry about directly with a lease.
Van leasing options to consider
Before we jump into common questions, it’s good to know there are different leasing options, so you can choose what suits your business best:
- Affordable lease deals: If you’re on a budget, there are some solid options that give you a good van at a low monthly cost.
- Long-term deals: The longer you lease, the lower your monthly payments usually are. Plus, it means you don’t have to worry about changing up vehicles any time soon.
- Vehicle choice: Want a Ford, VW, or maybe a Mercedes? Leasing gives you the freedom to choose the brand and model that works for your business without forking out loads of cash up front.
Frequently asked van leasing tax questions
Q: Can I reclaim VAT on personal use of a leased van?
A: Not fully. You can reclaim 50% of the VAT if the van is for both business and personal use. But if it’s purely for business, 100% of the VAT is reclaimable.
Q: Are maintenance and service costs for a leased van tax-deductible?
A: Yes, they are. If these costs are for business, you can claim them as a deductible expense, whether they’re included in the lease or you pay for them separately.
Q: Do I pay Benefit-in-Kind (BIK) tax for personal use?
A: Yes, but BIK tax for vans is generally lower than for cars and is set at a fixed rate, so you’ll always know what to expect.
Take the First Step to your perfect van lease
Figuring out the tax benefits and finding the best van lease for your business can all feel a bit much. So why not let us do the heavy lifting?
Our team at First Step is ready to answer any questions you have about van leasing, tax savings, VAT, or Benefit-in-Kind tax. We’re here to give straightforward, no-nonsense advice to help you pick a van leasing deal that’s right for you. Just give us a call or drop us a message, and we’ll help you make the perfect choice for your business.