Additional reporting by Ralph Morton
Company van tax at a glance
- Company van tax is liable if you, as an employee, use a company van for private use
- Use our Company Van Tax Calculator to work our your company van tax. The same tax calculator will also work out your fuel benefit tax if you are provided with free fuel by your employer
- If you are an employer, you will be liable for Class 1A NIC and P11D reporting if your vans are driven for private use other than ‘incidental’ use
- The correct term used by HMRC for company van tax is Van Benefit Charge
COMPANY van tax – do I have to pay it? That’s a common question raised by many trades and delivery drivers.
The answer is “yes” if the van you drive is supplied by your company and you use it for private mileage.
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 for 2018/19
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: see Company car tax tables for more information on this.
For 2018/19 tax year the company van tax benefit in kind is £3350 – a rise of £120 from last year.
You are then taxed on this £3350 benefit in kind depending on whether you pay tax at 20% or 40%.
If you pay tax at 20%, then the figure is £670 a year; if you pay tax at the higher 40% rate then the tax figure is £1340.
Company van tax is usually paid monthly and deducted from your salary by your employer.
HMRC says that if other employees use the same van, then the £3350 benefit in kind is divided by the number of employees using the van.
So if three employees used the same van, the Van Benefit Charge would be £3350 ÷ 3 = £1117.
What about company van tax for electric vans?
Electric vans are liable for company van tax. But at a reduced rate. For 2018/19 the Van Benefit Charge is 40% of the main rate – ie £1340.
So a 20% tax payer in an electric van will pay £268 a year in company van tax; a 40% tax payer will pay £536.
Tax on free fuel
If you drive your van for private use, then usually all your fuel is paid for. So in addition, any private fuel will also be taxable – the yearly tax liability for “free” fuel – or the fuel benefit tax – is £633, up £23 from 2017/18.
For a 20% tax payer, that’s £127 a year; for a 40% tax payer that’s £253 a year in addition to the company van tax.
You can avoid paying tax on free fuel by repaying all the fuel used for private mileage. In which case you will need to keep a log of your business and private mileage.
For drivers of electric vans, there is no fuel tax to be paid.
Can company van tax be avoided?
Simon Wroe, Sales & Marketing Director at Leasing Broker Federation member Lease4Less Vans, has this advice:
“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 coffe.
But if you keep on using the van to go to the supermarket, that is not.
In all eventualities, 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.
I’m self-employed – does company van tax apply to me?
No, is the simple answer!
Your van will be an expensed asset or on a van lease and is treated differently if you are self-employed as a sole trader.
For further information on company van tax, see the HMRC explanation on Gov.uk – Expenses and benefits: company vans and fuel.