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.....
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, then there’s the personal tax you might have to pay if you are using a work van for personal use. These are the current rates and rules for the 2021/2022 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. However, if you are an employee and use your van for private use regularly, you must pay Benefit In Kind (BIK) tax 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 BIK tax 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 doctor’s 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 at weekends and in the evening, it will be considered 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 authorities.
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 attract a flat rate of BIK, which is £3500. If your company also pays for your fuel, for example by giving you a fuel card, there is an additional BIK standard value of £669.
If you can’t use the van for 30 days in a row, or you have an employee who pays you to use the van privately or pays you back for your fuel, these amounts can be reduced. An employer also has National Insurance obligations to pay on the BIK.
What if you’re in the market for an electric van, though? Well, because the Government is keen to encourage businesses to switch to zero-emission vehicles, the current electric van BIK rate is £0 and there is no van fuel benefit charge either.
How much tax do I have to pay on a company van?
Thankfully, employees don’t have to pay the full standard value of the Benefit In Kind to HMRC. Instead, they 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 £700, which is £58.33 per month. Obviously, if you pay the 40% tax rate those sums double. 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 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 £275 for 12 months in the 2021/2022 tax year. For six months’ road tax you have to pay £151.25.
If you pay by Direct Debit, you can do so in a lump sum or monthly. The annual charge for 12 months is the same, but for six months’ tax, paying the lump sum by Direct Debit is slightly cheaper, at £144.38. Paying monthly adds a little more to the cost, with 12 months of road tax working out at £288.75.
If your van is registered between 1 January 2009 and 31 December 2010 (and is Euro 5 compliant) 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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