Buying a van, a car or a piece of kit is where sole trader tax gets fiddly. The relief you get depends on what the item is, whether you use the cash basis, and for vehicles whether you would be better off claiming the mileage rate instead. This guide covers the 2026/27 rules, including the cut in the main writing-down allowance to 14% from 6 April 2026.
Written and reviewed by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
For 2026/27, most sole traders get the full cost of a van, tools or a laptop off their profit in the year they buy it: as an expense under the cash basis, or through the £1 million Annual Investment Allowance.12 Cars are the exception. A car only gets capital allowances: 14% a year if it emits 50g/km CO2 or less, 6% a year above that, or 100% in year one if it is new and fully electric.3 For a car you can use the 55p-a-mile rate instead.4
Related: Which journeys count as business travel
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Since 2024/25 the cash basis has been the default for sole traders.2 Under it, buying business equipment is treated like any other expense: you deduct the cost in the tax year you pay for it. That covers vans, tools, ladders, a laptop, a phone used for the business, shop fittings and most machinery. Cars are specifically excluded and stay in the capital allowances system.
If you have opted out of the cash basis and use traditional accruals accounting, the result for most items is the same. The Annual Investment Allowance gives 100% relief on up to £1,000,000 a year of plant and machinery, which in practice covers everything a sole trader buys.1 Again, cars are not plant and machinery for AIA purposes.
Year-one relief is only valuable if you have the profit to set it against. A £24,000 van bought in a year with £20,000 of profit creates a loss, which you can carry forward or, in some cases, set against other income. Timing a big purchase into a strong year usually saves more.
| Van, used only for the business | Full cost, year one |
| Tools, computer, machinery | Full cost, year one |
| Car, 0g/km CO2, new | 100% first-year allowance |
| Car, 1–50g/km CO2 | 14% a year (main pool) |
| Car, over 50g/km CO2 | 6% a year (special rate pool) |
| Double-cab pick-up bought from April 2025 | Treated as a car |
A plumber buys a £24,000 van in 2026/27 and uses it only for work. Under the cash basis or the AIA, the whole £24,000 comes off that year's profit. If the plumber's profit was £60,000, the deduction removes £9,730 from the 40% band (£60,000 down to £50,270) and £14,270 from the 20% band.
Income Tax saved: £9,730 at 40% = £3,892, plus £14,270 at 20% = £2,854. Class 4 National Insurance saved: £9,730 at 2% = £194.60, plus £14,270 at 6% = £856.20. Total saving about £7,797, so the van effectively costs around £16,200 after tax relief.
If the van is later sold, the sale price is added back to profit in the year of sale (a balancing charge), so the relief is on the drop in value over the years you own it, not the full price for ever.
With a car you choose between two routes. Capital allowances plus actual running costs (fuel, insurance, servicing, repairs), all reduced to the business-use share. Or HMRC's simplified mileage rate: 55p a mile for the first 10,000 business miles in the year and 25p after that, which replaces both the allowances and the running costs.4
Take a £20,000 petrol car emitting 120g/km, used 70% for business. It goes in the special rate pool, so the first year's allowance is 6% of £20,000 = £1,200, of which 70% is claimable: £840. Fuel and running costs come on top. If the same car does 8,000 business miles, the mileage rate gives £4,400 instead (8,000 × 55p). For most sole traders driving an ordinary car, mileage is simpler and often bigger.
The sums change for a new electric car. The 100% first-year allowance (extended to 5 April 2027 for Income Tax)3 means a £30,000 EV used 80% for business gives £24,000 of relief in year one, which mileage will not match in the short run. You cannot switch a vehicle between the two methods once you have chosen, so decide when you start using it for work.
From 6 April 2026 the main pool writing-down allowance for Income Tax fell from 18% to 14%. The special rate pool stays at 6%.5 This mainly affects cars between 1 and 50g/km and any balance left in your main pool from earlier years. If your accounting year straddles 6 April 2026, a time-apportioned hybrid rate applies for that year.
To soften the cut, a new 40% first-year allowance has applied since 1 January 2026 to new main-rate plant and machinery, and unlike full expensing it is available to sole traders.5 It excludes cars and second-hand items. In practice the AIA already gives 100% on the first £1 million, so the 40% allowance only matters to the rare sole trader spending more than that in a year.
You can claim for more than one vehicle if each is genuinely used in the business. Each vehicle gets its own method: mileage for one, allowances for the other is fine. What you cannot do is claim mileage on a vehicle and also claim its fuel or a capital allowance.
Private use is the most common mistake. A van used at weekends or a laptop the family uses has to be reduced to its business share. Keep a mileage log; HMRC asks for one first when it checks vehicle claims.
Normal commuting to a fixed place of work is not business travel. If you rent a workshop and drive there every day, those journeys are private. Travel between customers' sites, to suppliers or to a temporary workplace counts.
Yes, in most cases. Under the cash basis a van is deducted as an expense when you pay for it, and on the accruals basis the £1,000,000 Annual Investment Allowance gives 100% relief in the year of purchase. Only the business-use share counts, and a later sale is added back to profit.
Yes, but not the Annual Investment Allowance. From 6 April 2026 a car with CO2 emissions of 50g/km or less gets 14% a year, over 50g/km gets 6% a year, and a new zero-emission car gets a 100% first-year allowance until 5 April 2027. Claim only the business-use share.
For an ordinary petrol or diesel car, the 55p-a-mile rate (25p after 10,000 miles) is usually simpler and often worth more. For a new electric car or a van with heavy business use, capital allowances plus actual costs usually give more relief, especially in year one. Once chosen for a vehicle, you stick with that method.
Yes, if both are used for the business. Each vehicle is treated separately and can use a different method, and each claim is limited to its business-use share.
Usually not as a day-to-day expense, because it is part of a building. Air conditioning installed in business premises is an integral feature and goes in the 6% special rate pool, although the Annual Investment Allowance can cover it in full. Repairing an existing unit is a normal revenue expense.
The rates, thresholds and rules in this guide are drawn from the official HMRC and GOV.UK sources below, using the confirmed 2026/27 figures. Each link opens the relevant official page in a new tab.
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.