Company van tax: understanding the rules

Tax rates for businesses using a van are simpler than they are for car drivers, but there are still issues to look out for

Toyota Proace City van - rear

Tax rates for vans are relatively simple for business owners to work through, although there are still certain factors to consider. Unlike cars, which face variable tax rates based on their CO2 emissions, vans and other light commercial vehicles (pick-up trucks and SUV-based commercial vehicles) all fall into one classification, which makes life simpler in terms of taxation.

Her Majesty's Revenue & Customs (HMRC) offers a variety of tax options, depending on how a van is used by a business. If it's solely used for work purposes, then no tax at all will be levied. This includes 'insignificant private use', which is used to describe trips such as making a detour to the shops for a coffee on your way to work, or a visit to the dentist during business hours, for example. HMRC sees this as having no discernible 'Benefit-in-kind' (company cars pay BiK tax because they are often used for journeys other than the commute to work), so there's no tax to pay.

However, once you get into the realms of use beyond work (private usage, which includes trips to the shops), then BiK kicks in and you'll have to cough up. As already mentioned, all panel vans are taxed at the same rate, so whether you're driving a small Citroen Berlingo, mid-sized VW Transporter or full-size Ford Transit, the tax you pay will be identical.

What is a van?

It might seem like a daft question, but the first thing you need to do is understand that there is an official HMRC classification for a van. Which is as follows:

  • A vehicle primarily constructed for the conveyance of goods or burden• A gross vehicle weight - fully laden - not exceeding 3,500kg

This covers panel vans with two or three-abreast seating, chassis cabs fitted out with conversions, two-seat commercial SUVs and pick-up trucks. In terms of double-cab vans (with a second row of seats behind the front row), there is a bit of a grey area in terms of tax.

Ford Transit 2019 side profile

The best thing to do here is double check the van's V5C registration document for its European classification. If the V5 says N1 or N2, then it's a van, but if it reads M1 or M2, then it must be taxed as a car, and that means emissions-based tax rates.

Double cab pickup truck tax rules

Things are a little more complicated for pick-up trucks, too. While a two or three-seat pick-up is easily classified, a five-seat double cab pick-up must have a payload weight in excess of one tonne to be classified as a light commercial vehicle (LCV). As an example, all bar one version of the Ford Ranger is classified as an LCV, the exception being the flagship Ranger Raptor, which has a payload under a tonne thanks to a suspension set-up that's designed more for off-roading than load carrying.

A commercial SUV (such as the Mitsubishi Outlander Commercial or Toyota Land Cruiser Commercial) is another exceptional case. In this instance, the vehicle must only have one row of seats up front, have all the back windows blanked and be stripped of all rear seating, which is usually replaced by a large, flat load area.

Company van tax rates

The current Benefit in Kind tax rate for light commercial vehicles is £3,430 for the 2020/21 tax year. That's the same for all vans, pick-ups and other commercial vehicles that qualify as a van. There are lower rates on offer to businesses in the following circumstances:

  • If an employee can't use the van for 30 days in a row
  • An employee pays you to use the van privately
  • Other employees use the van

The latter means a business can divid the BiK rate between the number of employees that use the van, while if it's a pool van with no specified keeper, there is no tax to pay.

How much van tax will you pay?

The amount of company van tax you’ll pay is simply your personal rate of tax times that fixed BIK value. So for a 20 per cent taxpayer it’s 20% times £3,430, which gives an annual figure of £686 – or £57.17 per month. 40 per cent taxpayers will pay double for obvious reasons.

Company van drivers also benefit from a very generous fixed Benefit-in-Kind rate for any private mileage fuel paid for by their company. This is set at £655, and again you simply multiply it by your tax rate to find the amount due to HMRC.

For 20 per cent taxpayers, that’s 20% times £598, which gives an annual figure of £131 – or around £11 a month, regardless of how much fuel your company supplies. Again, 40 per cent taxpayers will be charged double.

Electric company van tax

While there are no tax benefits for running a plug-in hybrid van (the only savings you'll get are from charging the battery), pure electric vans do offer savings. Unlike electric cars, which currently have zero BiK to pay, electric vans are charged at 60 per cent of the standard van rate, which currently stands at £2,058 for 2020/21.

They also save you money in terms of road tax, which is currently set at £0, and if you charge the van at home, then you should be able to claim back a percentage of your electricity bill as a business expense.

To find out more about the latest company van tax rules for pick-up trucks, click here...  

Recommended

Cheapest vans on sale 2021
Cheapest vans to buy - header
Vans

Cheapest vans on sale 2021

Businesses need vans to do the job without costing an arm or a leg. The UK’s cheapest vans should fulfil both criteria...
18 Jun 2021
New Genesis G80 2021 review
Genesis G80
Genesis G80

New Genesis G80 2021 review

Is the new Genesis G80 a worthy competitor in the executive saloon segment?
9 Jun 2021
New 2021 Vauxhall Combo-e Life electric MPV gets £31,610 price tag
Vauxhall Combo-e Life - front
Vauxhall Combo

New 2021 Vauxhall Combo-e Life electric MPV gets £31,610 price tag

Vauxhall’s pure-electric Combo-e Life people carrier is priced from £31,610 and offers seating for either five or seven
12 May 2021
Company car tax guide 2021/2022: everything you need to know
Executive saloons make popular company cars
Consumer news

Company car tax guide 2021/2022: everything you need to know

Company car tax is bound up in a complex net of emissions, salaries and a car's value; we explain how the system looks for the 2021/22 Financial Year
27 Apr 2021

Most Popular

Driving test update to preserve the manual gearbox
Dacia Duster gear lever
News

Driving test update to preserve the manual gearbox

With more drivers learning in autos and electric cars, the DVSA is looking to update the driving test so people can still drive manuals in future
16 Jun 2021
Tesla Model 3 police car all set for evaluation by UK emergency services
Tesla Model 3 police car - front
News

Tesla Model 3 police car all set for evaluation by UK emergency services

Tesla hopes to offer UK police forces a new zero-emission emergency responder option with the Model 3 police car
17 Jun 2021
New 2021 Vauxhall Astra to offer plug-in hybrid power
Vauxhall Astra render
Vauxhall Astra

New 2021 Vauxhall Astra to offer plug-in hybrid power

The new Vauxhall Astra will get a plug-in hybrid powertrain and a more premium image - here’s how it could look
17 Jun 2021
Ineos Grenadier prototype 2022 review
Ineos Grenadier prototype
Ineos Grenadier 4x4

Ineos Grenadier prototype 2022 review

Can the Ineos Grenadier really fill the mud-splattered void left by the old Land Rover Defender? We take a first drive in a prototype to find out...
15 Jun 2021
Motorists think they can get away with driving offences due to lack of road police
police speed gun
News

Motorists think they can get away with driving offences due to lack of road police

Lack of road traffic police officers in the UK is making it easy for drivers to break the law, according to a survey of 15,500 British motorists
16 Jun 2021
New Nissan Qashqai 2021 review
Nissan Qashqai 2021
Nissan Qashqai

New Nissan Qashqai 2021 review

We get behind the wheel of the larger, more comfortable and higher-tech Nissan Qashqai SUV in the UK
16 Jun 2021
New Audi Q4 e-tron 2021 review
Audi Q4 e-tron 2021  front
Audi Q4 e-tron

New Audi Q4 e-tron 2021 review

We get involved with the new all-electric Audi Q4 e-tron SUV on UK roads for the first time
17 Jun 2021
Dacia unveils new badge design
Dacia badge
Dacia

Dacia unveils new badge design

The new Dacia branding will feature on the company’s cars from 2022, with the Bigster being the first candidate
17 Jun 2021
UN report highlights ethical problems with electric cars
Electric car charging
News

UN report highlights ethical problems with electric cars

Analysis reveals lithium refining takes 65 per cent of Chilean region’s water, while 40,000 child miners dig for cobalt in DRC
14 Jun 2021
'I was cynical about Hyundai's aim to be the world's 2nd biggest carmaker, not now'
Opinion Genesis Hyundai Ioniq
Opinion

'I was cynical about Hyundai's aim to be the world's 2nd biggest carmaker, not now'

Steve Fowler is impressed by Hyundai's electric cars, its N division and now its luxury Genesis brand
16 Jun 2021
Fan-designed Ford Puma ST Gold Edition revealed
Fan-designed Ford Puma ST Gold Edition
Ford Puma

Fan-designed Ford Puma ST Gold Edition revealed

Ford unveils a special edition Puma ST, with a black and gold colour scheme chosen by Ford fans over social media
18 Jun 2021
Mazda to launch 10 new hybrids and three new EVs by 2025
Mazda electric plan
Mazda

Mazda to launch 10 new hybrids and three new EVs by 2025

The electrification push forms part of Mazda’s goal to become a completely carbon neutral company by 2050
17 Jun 2021
New Renault Arkana 2021 review
Renault Arkana - front
Renault Arkana

New Renault Arkana 2021 review

Does an eye-catching coupe-SUV body give the new Renault Arkana the edge over other mid-size SUVs? We find out...
16 Jun 2021
New Skoda Enyaq iV 2021 review
Skoda Enyaq iV 80 Sportline - front
Skoda Enyaq

New Skoda Enyaq iV 2021 review

The new Skoda Enyaq iV is the Czech firm’s first bespoke electric car and we've tested the full range on UK roads
10 Jun 2021