What Capital Allowances Can I Claim on Tools Laptops and Vans

Introduction

When you buy equipment for your business, the cost is often too large to claim as a normal expense. Instead, HMRC allows you to claim capital allowances. These reduce your taxable profit by recognising the depreciation in value of assets used for your trade.

Tools, laptops, and vans are common business assets that qualify for capital allowances. Understanding how these claims work helps you save tax, stay compliant, and manage your accounts more effectively.

What are capital allowances

Capital allowances let businesses claim tax relief on the cost of assets that they use in their operations over time. Rather than deducting the full cost as a running expense, you claim a portion through your tax return.

In most cases, small businesses can claim the full amount in the year of purchase under the Annual Investment Allowance (AIA). Larger or long-term assets may be written down gradually using writing down allowances.

Both sole traders and limited companies can claim capital allowances. The rules apply whether you use cash or accrual accounting, though the timing of the claim may differ.

What qualifies for capital allowances

To qualify, the item must be used for business purposes. Common examples include:

Tools and machinery

Office equipment such as computers and printers

Vans and commercial vehicles

Furniture, shelving, and fixtures

Business-use software and systems

Cars also qualify but follow separate rules, so they are not included in this guide.

The Annual Investment Allowance (AIA)

The AIA allows you to claim 100 percent of qualifying costs in the year you buy them, up to an annual limit of £1 million. This means you can deduct the entire cost from your profits before tax.

For example, if your business buys £5,000 of tools and a £20,000 van, you can usually claim the full £25,000 as a deduction in that year, provided the items are used exclusively for business.

The AIA applies to most types of plant and machinery, including tools, equipment, and vans. However, it cannot be used for cars or items gifted to you rather than purchased.

Writing Down Allowances (WDA)

If you do not claim AIA, or if your purchases exceed the annual limit, you can claim Writing Down Allowances. These allow you to deduct a percentage of the asset’s remaining value each year.

The main rate is currently 18 percent, while certain assets such as integral features or those used partly for non-business purposes may qualify at 6 percent.

For example, if you buy a van for £30,000 and do not claim AIA, you can deduct £5,400 (18 percent) in the first year, and then 18 percent of the remaining balance in subsequent years.

Tools and equipment

Most tools and machinery qualify for the full AIA. This includes hand tools, power tools, and specialist trade equipment. If you use the tools partly for personal and partly for business use, you can only claim for the business proportion.

For instance, if you buy a £2,000 set of tools and use them 80 percent for work, you can claim £1,600 as a capital allowance. Keeping detailed records of how the equipment is used helps support your claim if HMRC asks for evidence.

If you later replace the tools, you can claim capital allowances again on the new ones. Any proceeds from selling the old equipment must be included as a balancing charge, which increases your taxable income for that year.

Laptops and IT equipment

Laptops, tablets, and computers are also eligible for capital allowances. You can usually claim the full cost using the AIA in the year of purchase.

If you use the laptop for both business and personal tasks, you must apportion the cost. For example, if a £1,200 laptop is used 75 percent for business, you can claim £900.

Software that forms part of your system, such as accounting programs or professional tools, can also qualify. Subscriptions and cloud-based services are usually treated as running expenses rather than capital items, but permanent licences can be included in capital allowances.

If your business replaces IT equipment frequently, you may prefer to claim the AIA each time rather than using writing down allowances. This keeps your accounts simpler and ensures you get full relief in the same year.

Vans and commercial vehicles

Vans and other commercial vehicles are classed as plant and machinery, meaning they qualify for the AIA. This includes pickup trucks and delivery vehicles used for business purposes.

If your business buys a new or used van for £25,000, you can usually claim the full cost as an allowance in the year of purchase.

However, if the van is used for private journeys as well, you must restrict the claim to the business-use proportion. For example, if 70 percent of mileage is for business, you can claim 70 percent of the cost.

If you lease a van rather than buying it, you cannot claim capital allowances. Instead, the lease payments are treated as deductible business expenses.

When you sell or trade in a van, any amount received must be treated as a balancing charge if you previously claimed AIA, meaning it increases your taxable income in that year.

Electric vehicles and environmental allowances

While this guide focuses on vans rather than cars, it is worth noting that fully electric commercial vehicles can qualify for 100 percent First Year Allowances (FYA). This offers full tax relief in the year of purchase and encourages investment in cleaner transport.

Other energy-efficient or environmentally approved equipment may also qualify for enhanced capital allowances. These schemes change periodically, so it is worth checking current HMRC guidance before claiming.

Record keeping and evidence

To claim capital allowances, you must keep accurate records showing the cost, date, supplier, and business purpose of each item. Keep invoices, receipts, and bank statements as evidence.

Accounting software can help track assets, calculate depreciation, and generate capital allowance schedules automatically. If you use your accountant to prepare your tax return, providing clear records makes it easier to claim correctly.

If you are a limited company, the claim is made through your corporation tax return. If you are self-employed, include it in the capital allowance section of your Self Assessment tax return.

Common mistakes to avoid

Claiming the full cost of an asset that is partly for personal use.

Forgetting to add back proceeds when selling old equipment.

Claiming AIA on items that do not qualify, such as leased assets or cars.

Failing to keep proper documentation to support your claim.

Avoiding these mistakes ensures your claim is accurate and reduces the risk of HMRC queries.

Example summary

Imagine a self-employed electrician buys £3,000 worth of tools, a £1,000 laptop, and a £20,000 van in the same tax year. All are used fully for business. They can claim the entire £24,000 as an Annual Investment Allowance deduction in their first-year tax return, reducing taxable profit by that amount.

If the same purchases were made through a limited company, the claim would appear in the company’s accounts and reduce its corporation tax bill.

Conclusion

Capital allowances allow you to claim valuable tax relief on tools, laptops, and vans used for your business. Most small businesses can claim the full cost in the year of purchase under the Annual Investment Allowance, provided the assets are used wholly for business.

Keeping accurate records, understanding the difference between personal and business use, and reviewing claims each year ensures you get the maximum benefit and stay compliant with HMRC. If in doubt, ask your accountant to review your capital allowance claims before submitting your return.