Do you need to pay tax on your company van?

19 May 2023

DRIVING a company van? what tax are you liable for and how much?

Well, if the van you drive is supplied by your company and you use it for private mileage, then it’s yes in which case, HMRC expects you to pay company van tax – the Van Benefit Charge – because you are deriving a personal benefit from the supply of that van. That’s why it’s called a benefit in kind tax.

Van Benefit Charge

The annual benefit in kind tax liability for company vans is a fixed rate – unlike cars, where the tax is based on a scale of CO2 emissions and the list price of the car. These measures are annual upratings that increase the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2023 and have been uprated annually since 2014. The flat-rate van benefit charge will increase to £3,960. The multiplier for the car fuel benefit will increase to £27,800. The flat-rate van fuel benefit charge will increase to £757.

These annual uprating measures, in line with expectations, ensure the tax system continues to support the sustainability of the public finances. In addition, these measures ensure that individuals continue to pay a fair amount of tax on valuable employment benefits. Employers will be able to make the necessary changes to payroll systems and tax codes will be updated where appropriate, in advance of the 2023 to 2024 tax year. One-off costs include familiarisation with the new charges and businesses will need to update their systems to reflect the new figures for calculating the van benefit charge and car and van fuel benefit charges. There are not expected to be any continuing costs. Customer experience is expected to remain broadly the same as the method of reporting these benefits remains the same.

HMRC says the car and van fuel benefit charges provide a disincentive to undertake private mileage in company vehicles. Since April 2021, the government has applied a nil rate of tax to zero-emission vans within van benefit charge. These measures maintain the environmental signal by increasing the charges in line with inflation. Other impacts have been considered and none have been identified.

Electric vans are liable for company van tax. But at a reduced rate, while there is currently no tax on the electricity needed to charge the battery.

Can company van tax be avoided?

There are some common misconceptions about company van tax with UK businesses as benefit in kind tax rules are so different to cars. What many businesses don’t realise is that the HMRC doesn’t count the commute – the drive between home and work – as private mileage, like they do with cars. This means that if a company van driver only uses the van for the commute and daily business, and they do not use it for personal use, they don’t actually have to pay van tax at all.

However, if your company van is a pick-up or similar vehicle that you intend to use for private mileage as well as business use, you will still be liable to pay benefit in kind tax according to your tax rate of 20% or 40%. HMRC allows some ‘insignificant’ private mileage in addition to the commute to and from work. For example, if you make a detour to pick up a newspaper and a cup of tea or coffee. It’s a good idea to keep a record of your private mileage.

Van Benefit Charge on pool vans

If you use a pool van at work then you won’t have to pay company van tax. There are certain restrictions, though. HMRC says:

a pool van must be available to more than one employee;
a pool van is available to each employee because it is required to do their job;
in the normal course of events, a pool van is not used exclusively by one employee;
the pool van is not normally parked up near an employee’s home; and
must be used for business journeys – although HMRC will allow a pool van to be taken home at night to allow an early start the next morning.