Budget 2026: what it means if you're buying a van

The 2026 Budget, delivered on 28 October 2026, extended the 5p fuel duty cut to 1 July 2027 and cancelled the rise planned for January. It also raised the first-year allowance on new equipment from 40% to 50% from 1 January 2027 and cut the writing down allowance from 14% to 12% from April 2027. For most small businesses buying a van, tax relief is unchanged, because the £1 million Annual Investment Allowance still gives 100% relief on new and used vans.

Chancellor John Healey delivered his first Budget on 28 October 2026, and as today's Budget goes, it was a fairly gentle one for van owners. No rise in corporation tax, National Insurance or VAT. No new tax aimed at vans.

Two things do matter, though. What happens to the price of fuel, and how the tax relief on buying a van works from next year. The headlines make the second one sound like a big win. For most businesses it barely changes a thing, and it's worth knowing why before you make any decisions.

Fuel duty: no rise in January

Fuel duty was due to start going back up in January. It won't now. The 5p a litre cut that has been in place since 2022 has been extended again, this time to 1 July 2027, and the planned increase has been cancelled.

That's welcome, but let's not get carried away. A freeze isn't a cut. Diesel went past £2 a litre in October and nothing in the Budget brings that down. What it does is stop the price climbing by another few pence a litre on top, which matters when your van is doing serious miles every week.

The date to keep an eye on is 1 July 2027. Unless the government extends it again, the cut ends then and duty goes back up. Worth remembering when you're working out what a van will really cost to run over the length of a finance agreement.

Capital allowances: the headline and the reality

This is the bit that sounds bigger than it is.

Capital allowances are how a business gets tax relief on the cost of a van. Rather than putting the purchase through as an everyday expense, you claim allowances that reduce your taxable profit. The Budget made two changes.

First, from 1 January 2027, the first-year allowance on new equipment rises from 40% to 50%. In plain terms, you can knock half the cost of a qualifying new asset off your profit in the first year. New vans qualify. Second-hand vans and cars don't.

Second, from April 2027, the writing down allowance drops from 14% to 12%. That's the yearly rate at which anything that doesn't get upfront relief is gradually written off. So those purchases now take a little longer to work through.

Now the reality. Most small businesses never touch either of these, because the Annual Investment Allowance gets there first. It lets you claim 100% of what you spend on plant and machinery, vans included, up to £1 million a year. New or used. Sole trader or limited company. The Budget left it alone.

Limited companies buying new vans also keep full expensing, which gives 100% relief with no upper limit.

So if you're an electrician buying one van, or a courier adding two more, your tax position is pretty much what it was before the Budget. You can still claim the whole cost in the year you buy it, provided your accountant is content.

Where the changes do bite is at the bigger end. If your business spends more than £1 million a year on vehicles and equipment, the higher first-year allowance makes buying new a little more attractive. And if you're buying used vans beyond that limit, they'll be relieved more slowly than they used to be.

Does it matter how you finance the van?

It does, and it's one of the things people rarely ask about until they're sat with their accountant.

On hire purchase, the van is treated as yours for tax purposes from the start, even though you're paying for it monthly. That means your business claims the capital allowances, including the Annual Investment Allowance. It's one reason hire purchase is so popular with businesses that want the full tax relief in year one.

On a finance lease, the finance company owns the van. They claim the allowances, and your business generally puts the rental payments through as a cost instead.

Neither is better across the board. It depends on how your business is set up and what your accountant wants to achieve, which is exactly why we talk it through before recommending one.

What about electric vans?

The Budget confirmed the new pay-per-mile charge for electric vehicles will start in April 2028. It's aimed at electric and plug-in hybrid cars, not vans, so if you've been weighing up an electric van, this doesn't change the sums.

So should you buy now or wait?

For most businesses, there's no reason to wait. If your spending sits within the £1 million Annual Investment Allowance, you get the full relief whether you buy this week or next spring. Buy the van when the business needs it.

If you're a larger operator planning to spend well beyond that on new vans, it's worth asking your accountant whether to time the purchase for after 1 January 2027, when the 50% allowance kicks in.

Either way, getting the finance agreed early does no harm. As a credit broker working with a panel of lenders, Business Van Finance can offer things a dealer usually can't:

• VAT deferral, so you're not finding the VAT upfront on top of everything else
• Little or no deposit, where dealers often ask for 10% to 20%
• An agreed credit facility for further vans, so a growing business knows the funding is there for the next few months

There's no fee to you. Tell us what you're buying and we'll find the right lender for it.

Business Van Finance is a credit broker, not a tax adviser. Speak to your accountant about how these changes apply to your business.

Sources: HM Treasury, Budget 2026; Tax Policy Associates, Budget 2026: what it means.