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Spring Budget Boost to Van Leasing Sector

The commercial vehicle market received a huge boost in the Spring budget when the Chancellor announced companies can claim 100% qualifying machinery investment.

This means from April 2023 until the end of March 2026, 100% of the cost of qualifying equipment and machinery will be deducted from corporation tax bills in the first year of operation. This will now include fleet vans and trucks.

The new initiative aims to provide a world-leading capital allowances regime which will enable businesses in the leasing and rental sectors to provide customers with lower lease and rental rates.

This should indeed have largely positive implications for businesses across the board. We review the changes and the main opportunities for business owners.

What does this all mean?

The new legislation replaces the former super-deduction programme of 2021 which enabled a first year allowance of 50% on new plant and machinery investments. The new boost  will cut on average £9 billion in corporation tax, which could increase business investment by 3%.

Reduced overall cost

The new tax deduction can significantly reduce your costings when buying vans or van leasing. The Ford Transit Custom was recently voted Britain’s best medium-sized van and costs around £355 per month to lease. Over a 12-month period, this would reduce your corporation tax bill by £4,260 in your first year of lease.

Perhaps you’ve always dreamed of driving a sporty, Mercedes Vito or you need to upgrade to a bigger size for business and you’re too constrained by budget requirements. Reduced overall cost also gives drivers greater freedom over which van they choose.

Improved cash flow

These tax breaks can have a positive effect on your cash flow too. The changes can make leasing a more viable option as opposed to buying outright, which can incur costly upfront charges and put a hefty dent in your cashflow.

Monthly leasing repayments are fixed in rate which means leasers won’t have to worry about prices hiking in the face of ongoing inflationary pressures. Businesses can therefore stay on top of their month-to-month overheads more effectively.

Investment in green vehicles  

The development unquestionably provides an opportunity to invest in greener forms of transport. The tax break really benefits those looking to expand or replace their fleets and crucially, those looking to switch from ICE to EV.

One of the main barriers to EV adoption is often price. While electric vehicles are often cheaper to run, they have steeper upfront costs compared to their diesel counterparts. This development, which will allow leasing companies to buy cheaper, will also decrease leasing tariffs to customers.

Commenting on the announcement, BVRLA Chief Executive, Gerry Keaney, said: “The Government has acknowledged how critical vehicle rental and leasing is in driving business investment in cleaner commercial vehicles and infrastructure.  

“We look forward to working with them in the coming months to develop a powerful capital allowances regime that can drive even faster decarbonisation of road transport.”

With these new changes in full swing, fleet owners can invest in greener transport and pave the road towards a carbon-neutral future – one mile at a time.