A guide to van taxation

Despite sharing many similarities with the car industry, the taxation system for vans and van drivers is very different and far more complicated than that for cars. Road tax (or VED) is based on the emission standard and benefit-in-kind is a flat rate.

Road Tax, or VED

First of all, we start with the simplest part of van taxation, which is road tax. Unlike car road tax, where the amount is determined by the levels of CO2 emitted, van road tax is calculated by the age, or emission standard, of the vehicle.  

If a van is registered before 2001, the road tax charge is based on engine size. Vans registered before March 2001 pay £230 (£126.50 for 6 months) if their engine size is over 1,549cc, and £145 (£79.75 for 6 months) is below 1,549cc.

Euro4 vans (registered between March 2003 and December 2006) are liable for £140 VED a year and £77 for six months and Euro5 vans are subject to the same charges. All vans registered outside of these dates pay road tax of £225 a year and £123.75 for six months.

Benefit in Kind

Similarly tax rates for the private use of company vans do not mirror the system for cars. 

All vans with a payload of at least a tonne pay a flat rate benefit-in-kind of £3,090 which means a £618 annual tax bill for employees on the 20% rate or £1,236 for those on the 40% rate. Added to that is a free-fuel benefit charge of £581, which is taxed at £116 in the 20% band and £242 in the 40% band.

Electric vans

We’ve known for some time that the benefit charge support for zero emission vans will be gradually phased out. From the 2015/16 tax year, the charge paid by zero-emission vans (0% in 2014/15) will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 and 90% in 2019/20, with the rates equalised in 2020/21

Private or business use

That all seems fairly straightforward but things do get complicated when you are trying to establish the difference between what is considered business and private mileage for employees using their employer’s vans. 

If the van is used mainly for making goods deliveries or calling on customers and the only private use is commuting, there is no tax to pay but if the employee uses that van for regular personal trips they will be liable for tax, usually collected through the Pay As You Earn (PAYE) tax code. 

Lots of grey areas

If an employer considers that there is no tax to pay, they will need to keep sufficient records to show that the employee has the van mainly for work journeys and that private use is restricted to journeys between home and work. 

It’s not completely rigid though. A one-off trip to the dump or say, helping a friend to move is not considered taxable but then again you’ll be taxed if you take the van away on holiday. 

The tax charge is reduced if the employee does not have the van for the whole tax year, or if another employee also uses it for private travel. It’s further reduced if the employee pays something for their private use. The fuel charge is not reduced further unless the employee reimburses the cost of all fuel provided for private use. 

To prove exactly what the tax burden will be employers can asked their employees to keep mileage records, sign an agreement about the use of the van and have the use of the van put into a contract of employment.

The employer, if it considers an employee should pay reduced tax, must be able to show records of how its vans are shared. The employer must also record when the van has been off road for periods of 30 or more consecutive days if it wants a reduction and any contributions paid by employees towards private use of vans, and must supply proof that private fuel has been fully reimbursed.