- Guide to LCV taxation, including 2018/2019 tax rates
- Find out about road tax (VED) and benefit-in-kind
- Exemptions, reductions, business and private use explained
Now fully updated with information about 2018/2019 van and pickup tax costs, which apply from April 2018
The taxation system for vans and pickups – and their drivers – is different to that for cars. Some areas of van tax are comparatively straightforward, others more complex.
This guide will help you understand the current rules and rates in the 2018/2019 tax year, so whether you’re trying to find out more about road tax (VED), benefit-in-kind (BIK) or the difference between business and private use, this is the place to start.
The details below apply to all light commercial vehicles (LCVs) with a maximum gross vehicle weight – also known as the revenue weight – of up to 3,500kg.
There is a lot of information here, so we've included these handy links to make it easy to jump to the section that's most important to you:
- Road tax (VED) rates for new vans and pickups
- Road tax (VED) rates for older vans and pickups
- Van and pickup benefit-in-kind (BIK) rates
- The difference between business and private van use
- Van Fuel Benefit Charge
- The grey areas
- Electric van tax
- Pickup truck tax - further details
- Van tax exceptions and exemptions
Or, simply keep reading for the full Parkers Vans guide to tax.
Road tax – officially known as Vehicle Excise Duty, or VED – is the fee you must pay in order to legally drive your van on public roads.
The amount of road tax you pay for a car is partially determined by its CO2 emissions – the more it pollutes, the more you pay. However, for now at least, a light commercial vehicle (LCV) such as a van or pickup, road tax is charged at a flat rate, depending on the vehicle’s age. In 2021, the plan is to move to an emissions-based system, incentivising more environmentally friendly vehicles over the more polluting ones.
For now, though the 2018/2019 van road tax rate is £250 for 12 months, or £137.50 for six months - if paid in the conventional manner.
However, the DVLA also offers a Direct Debit facility. A single payment for the whole 12 months costs the same as above (£250), while a Direct Debit payment for six months is slightly cheaper at £131.25.
Spread the cost over 12 invidual monthly Direct Debit payments and you'll pay a slightly higher total of £262.50. Which you may well feel is worth it for the convenience.
These rates apply to all vans built after 1 March 2001 that fall under the TC39 VED tax code.
However, there is a different rate for vans that fall into specific periods of Euro 4 and Euro 5 emissions regulation, which have a TC36 VED code, as well as a different rate for vans built before 1 March 2001.
Older vans are taxed in a slightly different manner, with specific rates for certain periods of the Euro 4 and Euro 5 emissions standards.
This sounds complicated, but it simply means that if you have a Euro 4 van registered between 1 March 2003 and 31 December 2006 or a Euro 5 van registered between 1 January 2009 and 31 December 2010 you will pay £140 for 12 months or £77 for six months, again with a choice of single or monthly Direct Debit options.
There is no change in this rate versus the 2017/2018 amount.
At the moment there is no similar amendments for the latest (and cleanest) Euro 6 emissions legislation, but in March 2018, the UK chancellor Philip Hammond announced plans for a consulation on lowering the cost of tax for the cleanest new light commercial vehicles. Click here to read more.
At the 2018 Budget announcement, the chancellor announced that the results of this consultation will be released before the end of the year, and confirmed that there are plans to bring in 'environmental incentives' from April 2021, meaning that an end to the flat rate is in sight. We will have some warning on what to expect ahead of that, though, with the rates and bands set to be revealed around summer 2019.
If your van was built before 1 March 2001, you’ll pay a different rate again, depending on the size of its engine.
For engine sizes up to 1,549cc (that's just over 1.5-litres) the rate is £155 for 12 months, £85,25 for six months; for engine sizes above 1,549cc it’s £255 for 12 months, £140.25 for six months. Direct Debit is once again available.
Benefit-in-kind is taxation levied against any perks (benefits) you receive from your employer in addition to your salary – including access to vehicles. BIK is set at a flat rate for vans, and in 2018/2019 that amount stands at £3,350. In the 2018 Budget the chancellor Philip Hammond said that this will rise in line with the consumer price index in 2019. This is the same as the previous year, when the same policy saw the rate increase by £120, so it is unlikely to go up by much in 2019.
This means an annual tax bill of £670 for employees at the 20% income tax level (that’s just under £56 a month), while those in the 40% band will be charged £1,340 a year (which is just under £112 a month).
However, benefit-in-kind only applies if the van is used for private journeys. Vans that are exclusively limited to business journeys are not subject to BIK tax.
According to HM Revenue and Customs – HMRC, the government tax collection agency that deals with benefit-in-kind – you won’t have to pay anything if the van is used for business journeys only, or if it's a pool van rather than one linked to a particular employee.
A business journey is officially defined as a trip that is 'made as part of work (eg a service engineer travelling between appointments)' or one 'to a temporary work place'.
A pool van is a van that’s available for use by more than one employee, provided because it’s necessary for the job, and not kept at or near an employee’s home.
However, 'insignificant' private journeys are also allowed within these rules – such as making a 'slight detour' to buy a newspaper on the way to work, or taking a pool van home for the night if you need to make an early start in the morning.
If you use a work van for private journeys and your employer pays for the fuel, you’re also subject to tax on that benefit. The 2018/2019 Van Fuel Benefit Charge rate is £633 a year – but that's the benefit value, so you'll be taxed on 20% or 40% of that figure, rather than be forced to pay the whole amount.
How much you have to pay is further reduced if you can’t use the van for more than 30 days in a row, the fuel provision is withdrawn during the year, or if you reimburse your employer for the cost of the private-use fuel.
As you can probably tell, there are plenty of grey areas here.
For example, the benefit-in-kind charge can be reduced if the van isn’t available for 30 days in a row, or if you pay your employer for your private use of the van. In instances where more than one employee has access to the van for private use, the benefit-in-kind value can be divided between them.
There are also exemptions to the private-use rule – one-off trips to the dump, for example. Take your work van on holiday, though, and you should expect to be taxed on it.
If you want to avoid unnecessary tax it is important that employer and employee keep records proving how and when the van was used – or not used – and whenever the cost of private-use fuel was reimbursed.
As an incentive to encourage businesses to switch to electric vans with zero emissions, tax on electric vans is cheaper than it is for regular vans.
This process starts with annual road tax (VED), which is £0. Yes, it's literally nothing.
The Van Fuel Benefit Charge on zero emissions vans is also zero (£0) as, to quote the goverment's official documentation, 'electricity is not a fuel'.
Benefit-in-kind value on electric vans is also cheaper.
For 2017/2018 the electric van BIK value was just 20% of the regular rate. That makes the total value £646 for that tax year instead of £3,230.
HMRC has confirmed that for 2018/2019, zero emissions electric vans will incur benefit charges at 40% of the regular rate. While at £1,340 for the year that's more than double the previous amount, it's still a substantial saving over the 2018/2019 BIK rate for conventional petrol and diesel vans.
The percentage will continue to increase until it matches the rate for regular vans, which it is projected to reach in 2022.
So make the most of this incentive while you still can.
Any pickup truck that is classed as a light commercial vehicle is subject to the same flat rate tax rates as a van; hence the rising number of 'lifestyle' pickup sales in recent years, as their financial appeal has encouraged some drivers to choose them instead of a conventional company car or SUV.
Double cab pickups are particularly attractive for these purposes, as they have two rows of seats and four doors, making them as useful for carrying people as a regular car. However, to qualify as an LCV, a double-cab pickup must have a payload capacity of over 1,000kg.
There is some confusion about dual-purpose, car-derived vans (including the Fiesta Van below) and vans with additional rows of seats, such as double cab and kombi models - and indeed pickup trucks.
To be absolutely sure a vehicle qualifies as a light commercial in the government's eyes you can check the V5C logbook for something called the European classification. If this says N1 or N2 it will be taxed as a van; if it says M1 (or M2 for minibuses) it will be taxed as a car.