Van tax facts at a glance
- Company van drivers will pay tax on their company van based on their own tax rate of 20% or 40%
- The annual tax liability for company vans is fixed at £3170
- A 20% tax payer will pay £634 per year for their company van tax
- A 40% tax payer will pay £1268 per year for their company van tax
- The free fuel benefit charge is £598
- A 20% tax payer will pay £119 per year for their free fuel tax
- A 40% tax payer will pay £238 per year for their free fuel tax
- If a van is only used for business use, which includes the commute, and there is no personal van use, there is no BIK tax payable
A COMMON question that many UK SMEs have relates to van tax, and whether they need to pay it.
Most company vehicle operators know about benefit in kind (BIK) tax and yes, if you use your van for any private mileage, company van tax BIK is payable.
The annual liability for company vans is £3170 – this was raised in the 2016/17 Budget by the Chancellor. This means that for a 20% tax payer, their company van tax will be £634 if the van is used privately.
In addition, any private fuel will also be taxable – the yearly tax liability for “free” fuel is £598; a 20% tax payer will also pay £119 per year for “free” fuel.
Can company van tax be avoided?
Simon Wroe, marketing director at Lease4Less Vans, said: “There are some common misconceptions about 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 company 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% – at the fixed rate of £3170 per annum.”
Simon continued: “Because we specialise in vans, we understand the need for sound advice and our highly trained team are always on-hand to guide and assist clients with any queries that they may have regarding taxation and funding methods.”