Hire purchase and leasing: what you can claim

Renting equipment by the month — a leased van, a hired digger, a photocopier on HP — is part of working life for many trades. The tax treatment depends on one question: are you genuinely renting the asset, or buying it gradually?

What you can claim

• Monthly lease rentals — van leasing, printer leases and equipment rentals, in full.
• Short-term plant and tool hire — a digger for a week, a scaffold tower for a month.
• Excess mileage charges — at the end of a business lease.
• Servicing and maintenance — where it is included in the lease package.
• Interest and finance charges on hire purchase — the finance element of each payment.
• Lease arrangement and admin fees — the setup costs of the agreement.
• Cover-hire equipment — while your own leased kit is being repaired.

What you can't claim

• The capital element of an HP payment — that is claimed through capital allowances instead, not as a monthly expense.
• Leasing costs and mileage on the same vehicle — pick one approach per vehicle.
• The personal share of a leased asset — a family car used 10% for work gets 10% claimed.
• Equipment bought outright — a purchase is capital, not a lease, whatever the finance looks like.

Common mistakes

Recording the whole HP instalment as an expense is the number one error. On a £9,000 machine over five years at £189 a month, perhaps £70 of each early payment is interest — that £70 is the expense, and the rest is you buying an asset. Your HP agreement's amortisation table shows the split month by month.

Double claiming comes next: lease payments in this category and business mileage on the same van in the travel category. One or the other, or your quarterly totals quietly double-count the vehicle.

End-of-agreement costs surprise people too. Excess mileage and fair wear-and-tear charges on a business lease are claimable, but a balloon payment to own the vehicle outright is capital — it belongs with your asset records, not here.

How to record it in your MTD tracker

Select Hire purchase and leasing for monthly lease and hire payments. For HP, record the interest element here or in the Interest category — just not twice — and keep a note of the capital element for your accountant to claim through capital allowances at year end.