It’s the commercial vehicle equivalent of company car tax and generally makes a significantly smaller dent on your net income, which is why some people will choose a double cab pick-up as their ‘company car’ – if permitted.
For the tax year 2016/17, the annual van benefit charge for a company provided van is £3,170. So if you pay tax as a standard rate 20% tax payer you will pay £634 a year, that’s equivalent to £52.83 a month.
If the company also pays for fuel used for private mileage, the driver is taxed on this, too. The annual tax liability for so-called ‘free’ fuel – the van fuel benefit charge – is £598. So a 20% income tax payer will be charged 20% of £598 for ‘free’ fuel, which is £119.60 per year. That’s in addition to the £634 company van tax.
These figures double if you are a 40% tax payer.
However, if the driver covers no private mileage in the van, he or she will not have to pay company van tax.
The taxman does not count driving the van between home and work as private mileage. So if you take the van home at night and do no other mileage, you do not have to pay company van tax.
The taxman allows some ‘insignificant’ private use, such as dropping a child off at school on the way to work. But if the van is regularly used to do the supermarket run, that is counted as private mileage.
An employer pays Class 1a National Insurance on taxable benefits.
The Revenue & Customs suggests that to avoid possible confusion, and tax liability, a mileage record is kept; an agreement is signed about van use and use of the van is put into a contract of employment.
Company van tax is not applicable if the owner is a sole trader or partner.
What about company van tax and electric vans?
If you drive a zero emission electric van then the amount of company van tax is reduced. Currently it is 20% of the standard van benefit charge rate (ie 20% of £3170, which is £126.80 a year).
The relief, which is tapered, was due to increase to 40% of the standard van benefit charge in 2016/17; but this has not happened, and it remains at 20% of the standard charge.
- Before you make any decisions on changing your tax status, it is best to seek independent taxation advice, such as from an accountant.