Figuring out taxation rates for your fleet vehicles can be a headache. Your rates may vary depending on how your company van is used by your employees. Plus, Her Majesty’s Revenue & Customs (HMRC) charges different rates for company van tax and car tax, so its important to understand the difference.
However, there are some taxation exemptions, and calculating your van tax might be simpler than you think. In this article we answer “How much is my van tax?” and get to the bottom of reporting your vans correctly.
What is Company Van Tax?
You might be familiar with company car tax, which is a tax that businesses must pay for employees’ company cars. This is often confused with company van tax, but there are key differences to be aware of.
Company cars are considered a ‘Benefit-in-kind’, or BiK, meaning they are employee perks that aren’t counted as wages. The HMRC assumes that company cars are driven largely for personal use. This isn’t the case for company vans, which are used mainly for business purposes.
If company vans are used solely for business purposes, you are not required to pay van tax.
Want advice on how to better manage your fleet? Our fleet experts can give you a free consultation!
HMRC allows for ‘insignificant private use’ of company vans. This means minor trips such as making a detour to grab lunch or attend a doctor’s appointment during work hours. However, it counts as BIK once your drivers are using company vans for significant personal trips beyond work.
Employers may allow staff to use company vans for private use, but be aware that you will then be required to pay company van tax.
Defining ‘Company Van’
So what does the HMRC consider to be a company van, anyways?
HMRC defines a van as a vehicle primarily constructed for the conveyance of goods. It must have a gross vehicle weight not exceeding 3,500kg when fully laden. This includes:
- Two-seat commercial SUVs
- Pick-up trucks
- Panel vans with two or three-abreast seating
- Chassis cabs fitted out with conversions
- Double-cab vans with a second row of seats behind the front row are a grey area. If it has a payload of more than one tonne after seats and has a dedicated load area that is larger than the passenger area, it qualifies as a commercial vehicle.
Van Tax Exemptions
Depending on how you use your company van, the answer to “how much is my van tax” might be zero!
Your van is exempt from reporting if it’s:
- Accessible to each employee and required for them to do their job
- Not used by a single employee to the exclusion of others
- Not typically parked at or near employees’ homes
- Used solely for business journeys or minor private journeys
Are Electric Vans Exempt?
Unlike electric cars, which are exempt from BiK, electric vans still have to pay 60 percent of the standard van rate.
How Much is My Van Tax?
Luckily it’s pretty simple to determine ‘how much is my van tax’.
Unlike cars, which have different tax rates depending on their CO2 emissions, company vans are all taxed at the same rate.
Keep in mind that you must pay company van taxes for both the vehicle and the fuel.
- For the 2020/21 tax year, the BiK tax rate for light commercial vehicles is £3,430.
You might qualify for a lower rate if:
- An employee pays you for private van use
- An employee can’t use the van for 30 days in a row
- Other employees use the van (simply divide £3,430 by the number of employees using it)
- Your van is electric: pay 60 percent of the standard van rate, which is £2,058 for 2020/21.
You’re required to report a standard fuel tax of £655 to HMRC for company vans also used for private journeys.
This can be reduced if:
- the employee cannot use the van for 30 days in a row
- your employee reimburses you for their private fuel
- you stopped providing fuel during the tax year
Calculate your Van Tax
To calculate ‘how much is my van tax’, simply multiply your personal tax rate by the BiK value.
- If you pay 20% tax, multiply 20% by £3,430, equalling £686 per year per van
- If you pay 40% tax, multiply 40% by £3,430, equalling £1372 per year per van
Get a Beginners Guide to Fleet Taxes:
Track Your Company Vans
It’s essential to keep accurate records of your vehicle usage and fuel receipts throughout the year so you can show proof to HMRC when asked. This is easier than you think: there are amazing digital solutions that keep track of vehicle usage without creating extra work for you.
Van tracking systems like Vimcar’s Fleet Geo track your vehicle route history and compile it into easy-to-export spreadsheets.
Plus, Fleet Geo even helps you offset high taxation costs– it’s a no-brainer.
Reporting Company Van Tax
At the end of the tax year, submit a P11D form to HMRC for each employee you’ve provided with perks or expenses.
You may also need to complete a P11D(b) form which tells HMRC how much Class 1A National Insurance you need to pay on the company perks or reimbursements you’ve given.
While at first, figuring out ‘how much is my van tax,’ may seem complicated, van tax is fixed and can be determined with a simple calculation. Remember, you owe van tax if:
- Your company van is used for personal journeys
- Your van and fuel is part of a salary sacrifice scheme
You might luck out and qualify for an exemption, so be sure to check that before reporting. And don’t forget that HMRC may ask for proof of van usage, so keep accurate records of your journeys.
- Install a GPS tracker in your fleet so you take the guesswork out of route tracking.
Taking the time to understand company van tax and how it differs from car tax can help you decide what the most cost-effective fleet strategy is for your business.
To learn more about how Vimcar’s Fleet Geo can help you offset taxation costs and prove your vehicle usage to HMRC, contact our customer service team today.