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What tax do I have to pay on a van?

The amount of tax you pay on your van depends on how you use it. Fortunately, we've got everything you need to know...

Road tax - renewal reminder

Tax on your van can be divided into two different categories. There is the road tax or vehicle excise duty (VED) you pay on the vehicle, but also personal tax that you may have to pay if you are using a work van for personal use. These are the current rates and rules for the 2019/2020 tax year.

The good news is that if you only use your van for business purposes, or you are self-employed or a sole trader, you do not need to pay company van tax, but if you are an employee and use your van for regular private use then you must pay a Benefit In Kind (BIK) to HM Revenue and Customs (HMRC).

What is private use?

Private use is actually quite clearly defined and anything other than using the vehicle for business purposes will mean you’ll have to pay the BIK on the van.

Employees are allowed to take the vehicle home and use the van to drive to their place of work, but much beyond that would be deemed private use. The occasional trip to the doctors or stopping on your way to work to have a bacon sandwich is classed as insignificant private use, but if you use the van for the school run or over the weekends and evenings it will be considered to be private use.

Many vans these days have tracking software fitted and your employer is legally obliged to tell HMRC if the vehicle is being used for personal reasons. It’s also quite likely you’ll have to keep a record of your mileage, so any discrepancies will be very obvious to your employer and the tax man.

What is Benefit In Kind on a van?

Benefit In Kind is the value of something deemed to be a perk. Because having the use of a van for private use is a benefit on top of your salary you must pay tax on that benefit.

Vans currently have a flat rate of BIK which is £3430. If your company also pays for your fuel, usually with a fuel card, there is an additional BIK standard value of £655.

Zero emission vans pay 60% of the rate, meaning an employee is liable to pay £2058.

If you can’t use the van for 30 days in a row, your employee pays you to privately use the van or pays you back for your fuel then these amounts can be reduced. An employer also has National Insurance obligations to pay on the BIK.

How much tax do I have to pay on a company van?

The standard value of the Benefit In Kind is, thankfully, not what an employee has to pay directly to HMRC. Instead employees pay a percentage of the BIK value based on their own personal tax obligations.

If you pay 20% tax you pay 20% of the BIK value. Standard tax payable on a van is therefore £686 which is just £57.17 per month. Obviously, if you pay the 40% tax rate that amount doubles. The same process is applied to the fuel benefit tax and for zero emission vehicles.

How much road tax do I have to pay for my van?

Road tax or vehicle excise duty (VED) must also be paid either annually or every six months on your van. This is the tax you pay to drive a vehicle on the public roads.

Unlike passenger car road tax, which uses a sliding scale based on CO2 emissions, the VED for light commercial vehicles is relatively simple. Road tax is charged at a flat rate currently set at £260 for 12 months in the 2019/2020 tax year. For six months road tax you have to pay £143. 

If you want to pay by Direct Debit, you can pay in a lump sum or monthly. The annual charge for 12 months is the same, but for six months tax it’s slightly cheaper than a one-off payment at £136.50. Paying monthly adds a little more to the cost with 12 months of road tax working out at £273.

If your van is registered between 1 January 2009 and 31 December 2010 (and is Euro 5 complaint) you pay £140 for 12 months and £77 for six months. Vans registered between 1 March 2003 and 31 December 2006 (Euro 4 compliant) also pay £140 for 12 months road tax and £77 for six months road tax as a single payment.

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