19 January 2022

Company Van Tax Explained

If you’ve been using a company van during the tax year, you’ll probably want to know whether you’re liable to pay company van tax. Once you search for ‘tax my van online’, the sheer amount of company van tax rules and reductions is overwhelming, making it hard to decipher which apply to you.

In this article, we’ll explain whether you can use a company van for private use, what you’ll need to pay and how van tax is calculated.

Is My Van Used For Just Work Or Private Use Too?

If you’re looking to check your van tax, you might be wondering if you can use your company van for private use. The answer is usually ‘yes’, but you need to be aware that you will be taxed for the private usage. This is because of the ‘Benefit in Kind’ tax, which we'll explain below.

Benefit In Kind (BIK) Tax Explained

‘Benefit in Kind’ tax simply refers to any extra perks from your job that you are liable to pay taxes on. When it comes to company van tax rules, private usage of a company van is classed as benefit in kind, and you will need to pay taxes on this.

If you only use your company vehicle for work purposes, such as driving to and from work or to transport equipment, you don’t have to pay the van tax. This is also the case if the van is used as a work pool van, though there are specific criteria that need to be met, which are outlined below. There are also exceptions made for ‘insignificant private journeys’, but these have a very limited criteria, including driving to the shops to buy a drink on your way to work, or driving to a doctor’s appointment on your way home.

However, if you drive your company van on evenings and weekends or for the school run, this will be classed as private usage and you will need to pay the benefit in kind tax.

How Is Van Tax Calculated?

In the 2021/2022 tax year, the BiK company van tax rate is fixed at £3,500, whilst the BiK tax rate on company fuel for private journeys is fixed at £699. However, employees do not pay the full value of the company van tax or fuel tax, instead paying a percentage of either 20% or 40%, depending on their personal tax requirements.

You could also receive a reduction on the standard value of the tax in certain cases. The company van tax can be reduced if you cannot use the van for 30 days consecutively or if you pay your employer for the private usage of the van. You can also receive a reduction if multiple employees use the van, as the value will be divided between all employees who use it.

You will need to report the amount of company fuel used for private journeys. You can receive a reduction on the company fuel tax if you cannot use the van for 30 days in a row, if you pay your employer back for the fuel used on private journeys, or if your employer stopped providing fuel during the tax year.

How Much Tax Will I Pay On My Company Van?

If you’re wondering ‘how much is van tax?’, you’ll be pleased to know that the answer is relatively simple to figure out. If you pay the 20% tax rate, you’ll pay 20% of the standard Benefit in Kind value. 20% of £3,500 means an annual cost of £700, or £58.34 per month. Taxpayers who pay 40% tax would pay double this amount.

This also applies to the company van fuel benefit tax. 20% of £669 gives the annual cost of £133.80, or £11.15 per month. Again, this figure would be doubled for people who pay 40% tax. If you’d like to see the exact amount you’ll pay for both the van and fuel taxes, including for future tax years, you can use a company van tax calculator to view this.

Searching for ‘tax my van online’? You should also be aware of the many potential reductions you could qualify for. You can use payroll software or HMRC’s PAYE online service to work out what reductions you’ll receive.

Do Electric Vans Pay Van Tax?

If you’re using an electric company van, you’ll be pleased to know that the tax on zero-emission vans has been reduced to 0%. That means you’ll pay nothing for the private use of your electric company van. Plus, there’s no Benefit in Kind tax for the use of electricity for charging. Hybrid and plug-in hybrid vans are not covered and will be required to pay the standard amount. It’s also important to remain aware that the reduction may be subject to change over time.

Do I Pay Van Tax If I'm Self-Employed?

Put simply, no. For the self-employed, company van tax won’t apply. If you’re self-employed, then your company van will be managed differently, as an expensed asset. This way, you may be able to claim for the cost of purchasing a company van – and leasing a van can be a deductible expense too.

Plus, if your business is VAT-registered, you can claim up to 100% VAT back on your monthly payments. However, this is provided the van is used for business purposes only

Do I Pay Van Tax On A Work Pool Van?

Work pool vans are also generally excluded from the company van tax, but according to HMRC, there are some specific criteria that all need to be met.

To be exempt from the tax, the work pool van must be:

  • available to and used by more than just one employee
  • available to employees because they need it for their work
  • not normally used by only a single employee
  • not usually parked at or near employees’ residences
  • used only for business journeys – though limited private use is allowed if it’s incidental to a business journey

Leasing A Van With Leasing Options

Now you know the company van tax rules, it's time to look for the perfect company van for your business. At Leasing Options, we offer a wide range of business van lease deals to suit your needs – whether you’re looking for the most affordable option or an electric van to make use of those tax benefits. As we work with leading manufacturers and lenders, you can rest assured that you have plenty of brilliant options to choose from, including insured leasing so you know you’re fully covered.

Want to get the ball rolling? Check your financial eligibility online or get in touch with our team to learn more about our business van deals.

Company Van Tax FAQs

How Much Tax Do You Pay on a Company Van?

Ultimately, this will depend on what you’re using the van for. If you exclusively use the company van for work purposes, then you won’t pay any taxes. However, if you use the company van for private journeys, in most cases, you will need to pay van taxes.

If you are self-employed and have purchased the van yourself for your business, then you will be able to deduct it as a capital allowance or allowable expense on your tax return, depending on the type of accounting you use.

What Is the Taxable Benefit on a Company Van?

There is a taxable benefit on company vans known as the van benefit charge (VBC). This applies when an employee uses a company van for personal journeys. If you only use your company van for work purposes, then you won’t be liable to pay this tax.

‘Insignificant private journeys’ are allowed, but the criteria are very limited, including taking a detour to buy an item on your way to work or visiting the doctor during work hours. Driving the van on evenings and weekends will not be classed as an insignificant journey, and you’ll be liable to pay the tax.

How Is Company Van Tax Calculated?

If you want to know exactly ‘how much is van tax?’, then it helps to understand how company van tax is calculated. The van benefit charge is currently fixed at £3,500. Employees don’t have to pay the full rate, however – the amount you’ll need to pay will correspond to your personal tax rate. Those who pay 20% tax will pay for 20% of the standard £3,500 value, whilst those who pay 40% will obviously pay double that amount.

As well as this, you might also be eligible for a reduction in the standard value if you meet certain criteria - i.e., if you cannot use the van for 30 days consecutively or if you pay your employer for the private usage of the van. You can also receive a reduction if multiple employees use the van, as the value will be divided between all employees who make use of the van.

Is a Work Van Tax Deductible?

If you purchase a work van, this is classed as ‘plant and machinery’ and you can claim for it as a capital allowance under the annual investment allowance (AIA). These assets qualify for 100% allowances, meaning that you can deduct the full value from your profits before tax.

Can I Claim for a Van on My Tax Return?

Yes, absolutely. If you purchase a van for work purposes, you can claim it as a capital allowance. It will qualify for a 100% deduction, meaning you can take off the full value from your profits before paying tax.

Whilst you can’t claim a van lease as a capital allowance, it is tax deductible as an allowable expense. This way, you’ll still be able to offset your expenses by reducing your profits before tax. Plus, any service charges incurred upon returning the company van will also be covered.

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