Van tax: do you have to pay it?
Well yes if you use a company van for private mileage, then you must pay company van tax.
It’s known as a benefit in kind.
Company van tax
- Annual tax liability is a fixed rate of £3170 for 2016/17
- You pay tax on this at your rate of tax – 20% or 40%
- So van tax works out at £634 or £1268 a year
- The free fuel benefit charge is £598
- So the tax on free fuel is £119 (20%) or £238 (40%)
For the tax year 2016/17, the annual van benefit charge for a company-provided van is £3,170. So if you pay tax as a standard rate 20% tax payer you will pay £634 a year, that’s equivalent to £52.83 a month.
If the company also pays for fuel used for your private mileage, the driver is taxed on this, too. The annual tax liability for so-called ‘free’ fuel – the van fuel benefit charge – is rising to £598 for 2016/17.
So a 20% income tax payer will be charged 20% of £598 for ‘free’ fuel, which is £119.60 per year. That’s in addition to the £634 company van tax.
These figures double if you are a 40% tax payer.
An employer pays Class 1a National Insurance on taxable benefits.
Company van tax is not applicable if the owner is a sole trader or partner.
Can I escape van tax?
Yes you can.
If you cover no private mileage in the van, then HMRC doesn’t count this as a benefit and you will not have to pay company van tax.
The taxman does not count driving the van between home and work as private mileage – unlike a company car driver, for example, which adds to the attraction of a double cab pick-up as a ‘company car’ where permitted.
So if you take the van home at night and do no other mileage, you do not have to pay company van tax. Hurrah!