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Van Tax – when you have to pay and how to reduce it

For many people, having a company van for private use is a cost effective alternative to having a company car, especially when it comes to smaller vans with car like cockpits. But it is important to remember that unlike days gone by, company vans still attract a tax for the so-called ‘benefit in kind’ that they provide if they are used for personal journeys.

How are company vans taxed

Since 2007, company vans have been taxed at a set rate when they are made available for private use. Unlike cars, where the benefit in kind company van tax depends on the list price of the vehicle, the benefit in kind for vans is set at £3,000, regardless of the list price of the van. This means that for 20% taxpayers, having private use of a company van will incur a tax cost of £600 per year. If you also get your private fuel paid for, then you will pay tax on a further benefit of £564, resulting in a further tax of just over £110.

The tax advantage of a company van

The tax benefits of having private use of a company van are clear. If you had a company car, then your tax would be based on its list price, and you could be liable for tax of £2,000 or more. With vans, the tax rate is set at the same level whether you drive a tiny KA van or a long wheel base Transit, so you will never pay more than £600 if you are a basic rate taxpayer.

Of course, having a van provided for your use is not quite the same as having a brand new company car, but if all you need is transport, rather than bragging rights at the golf club, driving a company van makes a lot of financial sense.

How to trim your company van tax

You can cut the cost of company van tax even further by contributing to the cost of the van, or by sharing the van with a colleague, but both of these defeat the object. By far the best way to reduce your tax bill is to avoid it altogether, by keeping your personal trips within the definition of ‘insignificant private use’.

Insignificant private use allows you to use a company van for commuting to and from work. It also allows for what are deemed intermittent or irregular other trips, as long as these don’t become the norm. For instance, if the school run is on your way to work, that is allowable, but if you regularly make a special trip to school and return home before you leave for work, then that is not. Similarly, you can use your company van occasionally for personal use and still pay no tax, but if you drive to the match, home and away, every Saturday, you will quickly fall foul of the taxman. You may need to record all your private mileage, or sign a contract at work that limits private use, in order to avoid being taxed for your company van.

For more information on van tax, visit the HMRC website

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One Quote Direct Insurance Services Limited trading as Octagon Insurance Services is an appointed representative of Europa Group Limited and acts as a credit broker and not a lender in relation to premium finance contracts. Registered as a limited company in England and Wales No. 5479983. Europa Group Limited is authorised and regulated by the Financial Conduct Authority, Financial Services Register No. 309794. Registered office: Europa House, Midland Way, Thornbury, Bristol, BS35 2JX.

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