The amount of tax you pay on your van depends on how you use it. Fortunately, we've got everything you need to know in one place...
- What qualifies as a van for HMRC?
- What is private use?
- What is ‘benefit in kind’ for a van?
- How much tax do I have to pay on a company van?
- How much road tax do I have to pay for my van?
- Self-employed status and van tax
- What are the tax rules on double-cab pick-ups?
- See the winners of our 2023 Van and Commercial Vehicle Awards >>
Tax on your van can be divided into two different categories. There’s the road tax or vehicle excise duty (VED) you pay on the vehicle itself, then there’s the personal tax you might have to pay if you are using your work van for personal use.
In this story, we’re using the current rates and rules for the 2022/2023 tax year to reveal how much tax you’ll have to pay. And don’t forget, our free van tax calculator can do all of the hard work for you.
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 qualifies as a van for HMRC?
Most conventional vans that weigh no more than 3500kg fall under the van category for tax purposes, so if you have, for example, a Ford Transit Custom HMRC considers it a van. There are some grey areas, though. Vehicles that might be considered cars for tax purposes include pick-up trucks, passenger vans with extra rows of seats and small car-derived vans such as the Toyota Corolla Commercial.
If you’re in doubt, check the vehicle’s V5C registration document and look for the European classification. N1 or N2 means it is classed as commercial and taxed as a van. M1 or M2 means it is considered ‘dual purpose’ and treated as a car. There is also advice about how to identify a car-derived van or dual-purpose vehicle on the UK Government’s website.
What is private use?
Private use is defined as anything other than using the vehicle for business purposes. 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 evenings, 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 journeys. It’s also quite likely that 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’ for a van?
Benefit in kind (BIK) 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 £3600 for the 2022/23 tax year. If your company also pays for your fuel – by giving you a fuel card, for example – there is an additional BIK standard value of £688.
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 BIK 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 £720, which is £60 per month. Obviously, if you pay the 40% tax rate those sums double, meaning you’ll pay £120 per month. The same process is applied to the fuel benefit tax and for electric vans.
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 and, in some cases, electric range, the VED for light commercial vehicles weighing less than 3500kg is relatively simple. Road tax is charged at a flat rate currently set at £290 for 12 months in the 2022/2023 tax year. For six months’ road tax you have to pay £159.50.
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 £152.25. Paying monthly adds a little more to the cost, with 12 months of road tax working out at £304.50.
If your van was 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.
Self-employed status and van tax
You can claim a number of van-related expenses if you are self-employed and use your vehicle for work. According to HMRC, the following costs are acceptable:
– Vehicle insurance- Repairs and servicing- Fuel- Parking- Hire charges- Vehicle licence fees
– Breakdown cover
You cannot submit fines or travel expenses between home and a permanent place of work (commuting), nor can you claim for personal/non-business travel costs.
What are the tax rules on double-cab pick-ups?
Pick-up trucks can be a grey area for taxation. If they have a payload capacity of more than 1000kg, they are considered light commercial vehicles and taxed in the same way as a van.
However, not all pick-ups are classed as vans for tax purposes and therefore may not be subject to BIK tax. The V5C certificate will tell you for sure. Double-cab pick-ups often fall into this category, and that – along with their creature comforts and five-seat interiors – makes them attractive to drivers.
See the winners of our 2023 Van and Commercial Vehicle Awards >>
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