December 05, 2016

Company van tax

van finance

If you’ve ever had a company car, you’ll know that tax is paid on a sliding scale based on a number of things; the vehicle’s value, the fuel it uses and its emissions. However, the tax regime for company van drivers is a lot less complex.

Let’s start off simple. If you use your van purely for work, with a little of what HMRC has labelled ‘insignificant private use’, you’ll avoid a tax bill altogether. The reason for this is that there is no Benefit-in-Kind (BiK) attached to the vehicle provided by your employer or your company.

There is a caveat in that if you use your van for ‘private usage’ (another HMRC label – we’ll explain) then you must pay BiK company van tax.

HMRC definitions

Before you start to calculate the tax bill you may or may not be expected to pay, you need to understand HMRC’s definition of a van. This may sound stupid but it exists for taxation purposes.

Here’s the criteria used to classify light commercial vehicles (LCVs):

  • A vehicle primarily constructed for the conveyance of goods or burden
  • A gross vehicle weight not exceeding 3500kg when fully laden

Minibuses are not classed as vans as they are designed to carry people, while doublecab pick-ups may or may not qualify based on various criteria.

Insignificant private use

This term may sound a little ambiguous and will no doubt have you opening your browser to google its definition. Don’t worry – we’ll explain it for you. So what counts as ‘insignificant private use’? Not a lot. Basically, you can commute to and from work, take a detour for a ‘pit-stop’ at the local corner shop to pick up some lunch or even a one-off trip to the doctors. But that’s it.

If you do any of the following things, your company is legally obliged to inform the taxman: the school run, shopping trips, taking the kids to football practice – all of these things are regarded as SIGNIFICANT private usage. Your employer should keep mileage records of your journeys – regardless of whether it’s for work or private use – in case of an impromptu visit from the auditors.

Company van tax rate

It’s not all bad news, though. There may be tax due but it’s a lot less than if you were driving a company car. As mentioned earlier, the BiK rate for vans is a lot less complex than its company car counterpart. In fact, there is just one single fixed rate for vans, set at £3170.

Don’t panic! That doesn’t mean you’ll be expected to pay over three grand – far from it! The method used to calculate company van tax is as follows: your personal rate of tax times the fixed BiK sum of £3170. So, if you pay tax at a rate of 20%, you’d pay 20% of the BiK rate, which would be £630 per year – or £52.50 per month.

If your company pays for fuel used for private purposes, there is also a BiK rate applicable. It’s calculated in the same way as company van tax; your tax rate times the BiK rate, in this case £598. That means a 20% taxpayer would owe £119.60 per year.

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