Company van tax explained

When it comes to owning or leasing a van in the UK, there are different types of taxes to consider – Benefit in Kind (also known as company van tax), road tax and van fuel tax.

Each type of tax has a different purpose and is worked out differently. Whether you’re planning to lease or buy, knowing your tax obligations is key. Let’s take a closer look:

Company van tax/Benefit in Kind van tax

Company van tax, also referred to as Benefit in Kind van tax, is applicable when an employee uses a company van for personal use. It’s essentially a tax on the ‘perk’ of having access to a company van for private use.

Road van tax

Road tax, officially known as Vehicle Excise Duty (VED), is a tax paid for most vehicles used, parked or stored on public roads in the UK. This includes van leasing deals vehicles.

The amount of road tax you pay depends on various factors, including the vehicle type, CO2 emissions and registration date.

Van fuel tax

Van fuel tax relates to the private use of fuel provided by an employer for a company vehicle. Employees who use employer-funded fuel for private journeys are taxed accordingly.

Benefit in Kind (BiK) applies when an employee uses a company van for personal journeys. This is a perk enjoyed by many Brits and it doesn’t go unnoticed by HMRC.

The value of the benefit is calculated based on the van’s list price, as well as CO2 emissions and other factors. Employees then pay tax on this benefit according to their tax rate.

For the 2024/2025 tax year, the BiK tax rate for company vans is fixed at £3,960. This represents a jump of £360 on the previous year’s rate, adjusted to match the consumer price index.

Rates are fixed though employees don’t pay the full value of these taxes. Instead, they pay a percentage, usually between 20% and 40%.

Van tax is calculated based on different factors, including the type of tax being paid, vehicle emissions, list price and the personal tax rate. Let's consider an example to better understand how the numbers are crunched:

Suppose an employee uses a company van for private journeys and falls into the 20% tax bracket. They would pay 20% of the standard BiK value for the van, which is £3,960 for the 2024/2025 tax year. This amounts to an annual cost of £792 or £66 per month.

If you're considering an electric van lease, you’ll be pleased to know that the tax on zero-emission vans has been slashed to 0%. This means you'll currently pay nothing for the private use of your all-electric company van.

Hybrid and plug-in hybrid vans aren’t covered under this exemption so you’ll still have to pay tax but generally at a lower rate due to the reduced emissions.

No, if you're self-employed, company van tax doesn’t apply. Instead, your company van is considered an expensed asset.

This means you can claim the cost of purchasing or leasing a van as a deductible expense for your business. If your business is VAT-registered, you can claim up to 100% VAT on your monthly van leasing deals payments.

Work pool vans are generally excluded from company van tax, but specific criteria must be met. To be exempt, a work pool van must be available to and used by more than one employee.

It must also be needed for work purposes, not primarily used by a single employee, not parked at or near employees' residences and used only for business journeys. Private use is occasionally allowed but it’s extremely limited.

Yes, employees who use employer-provided fuel for private journeys are taxed on this benefit. The amount is calculated based on fuel value and the personal tax rate.

Reductions may apply if the van isn’t used for private journeys for a consecutive period. Van fuel tax can also be avoided if the employee reimburses the employer for private fuel use.

Most vehicles driven on public roads in the UK are subject to road tax. Also known as Vehicle Excise Duty (VED), it’s paid by owners to the Driver and Vehicle Licensing Agency (DVLA).

There are exemptions and discounts available but most motorists pay. The amount depends on factors like fuel type and environmental performance, with serious discounts offered to low-emission vehicles.

Navigating van tax can be daunting, but you don't have to do it alone. At Leasing Options, we're experts in van tax and provide tailored advice to help you understand your obligations and make informed decisions about van leasing deals.

Whether you’ve got your eye on a bestselling workhorse like the Ford Transit, an allrounder like the Mercedes Sprinter or a whisper-quiet Volkswagen ID, we’re here to help you find your perfect van lease.

Contact our expert team today to discuss your van leasing requirements and get personalised advice on van tax.