Tag: van

Taxation for commercial van and pickups – and their drivers – is different to that for cars. In some areas this makes it much more straightforward, in others it’s a little more complex. This guide will help you understand the current rules and rates in the 2020/2021 tax year, as laid out in the 2020 Budget.

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 (3.5 tonnes or 3.5t). 

What’s the difference between van and car road 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, with a light commercial vehicle (LCV) such as a van or pickup, road tax is charged at a flat rate, which varies only with the vehicle’s age.

So whether you drive a big van like a Ford Transit or a small van like a volkswagen Caddy, if they are the same age they will be taxed the same amount.

How much does van tax cost?

The standard 2020/2021 van road tax rate is £265 for 12 months, or £145.75 for six months – if paid in the conventional manner at the Post Office. This applies to all petrol and diesel vans built since 1 March 2001 that fall under the TC39 VED tax code.

While there are some exceptions for Euro 4 and Euro 5 vans – detailed below – this means that no matter what size the van, nor whether you’re a business or private user, van tax is exactly the same. A flat rate, in other words.

Can I pay my van tax by Direct Debit?

You can now also pay your van tax via Direct Debit. A single payment for standard rate above costs £265 for 12 months, while a Direct Debit payment for six months is £139.13.

Spread the cost over 12 invidual monthly Direct Debit payments and you’ll pay a slightly higher total of £278.25. Which you may well feel is worth it for the convenience.

Do older vans and pickups pay different road tax?

Older vans are taxed in a slightly different manner, with specific rates for certain periods of the Euro 4 and Euro 5 emissions standards that fall under a TC36 VED code, and another for vans built before 1 March 2001.

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 pay £140 for 12 months or £77 for six months, again with a choice of Direct Debit options.

The Direct Debit costs the same for 12 months or £73.50 for six months, and if you want to pay monthly it works out at £147 for the year.

Do any vans pay the same amount in tax as cars?

If your van was built before March 2001, you’ll pay a different rate again, depending on the size of its engine. This is one area where cars and vans are taxed the same way, and the VED tax code for these is TC11.

For engine sizes up to 1,549cc (that’s just over 1.5-litres) the rate is £165 for 12 months, £90.75 for six months; for engine sizes above 1,549cc it’s £270 for 12 months, £148.50 for six months.

Direct Debit is once again available. A single 12-month payment costs £165 for the lower category or £270 for the higher category, while six months is £86.63 or £141.75. If you want to pay by monthly Direct Debit, the total cost works out at £173.25 or £283.50.

Can I still pay my van tax at the Post Office?

Yes, you can still go to the Post Office to pay your van tax.

You’ll need to bring the correct documents with you, including the vehicle tax reminder (V11), your vehicle registration document (V5C) and MOT certificate, if applicable (details of other documents you might need are on the Post Office website), but otherwise it’s a just a case of queuing at the counter as it’s always been.

Payment options are Direct Debit, cash, cheque, debit card, credit card or postal order.

Can I pay my van tax online?

If you don’t want to queue in the Post Office, there is now an online service for taxing your van or pickup.

You’ll still need the V11 reminder letter or, if you haven’t got that, the V5C registration document, but otherwise it’s just a case of following the instructions on the official government vehicle tax website.

What is the benefit-in-kind (BIK) rate for vans and pickups?

Benefit-in-kind is taxation levied against any perks (benefits) you receive from your employer in addition to your salary – including access to vehicles. This means it generally tends to be referred to as company car tax (CCT), as vehicles are usually the highest of these expenses.

However, while BIK varies for cars it is set at a flat rate for vans and qualifying pickups. From 6 April 2020, the BIK for vans and pickups is £3,490.

This means employees at the 20% income tax level will face an annual company van tax bill of £698 (that’s about £58.17 a month – £1.00 more than in 2019/2020), while those in the 40% band will be charged £1,396 a year (which is around £116.33 a month – £1.99 more than in 2019/2020).

This is considerably cheaper than most cars. What’s more, 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.

What defines business or private use of a van?

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 (such as 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.

Is van fuel subject to tax?

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 current Van Fuel Benefit Charge rate is £666 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.

This works out at £133.20 for 20% payers and £266.40 for 40% payers, around £11.10 or £22.20 per month.

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.

Lots of grey areas

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 or pickup 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.

How much does it cost to tax an electric van?

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 for electric vans. Yes, it’s literally nothing.

The Van Fuel Benefit Charge on electric vans 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 cheaper, too.

For 2017/2018 the electric van BIK value was just 20% of the regular rate, in 2018/2019 it rose to 40%, and in 2019/2020 it rose to 60%, which works out at £2,058 (60% of £3,430). This was all part of the goverment’s plan to bring it into line with regular petrol and diesel vans in 2022.

However, as of the 2020 Budget, those plans have now changed, and as a means of incentivising electric vehicles, the government has slashed the van benefit charge back to £0 again. So there is no company car tax on electric vans.

Are pickups taxed the same as vans?

Any pickup truck that is classed as a light commercial vehicle (LCV) 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.

If it doesn’t, it counts as a car for some tax purposes. An example of this would be the Ford Ranger Raptor, which meets the rules for flat-rate van VED (N1 type-approval) but counts as a car for BIK – which means a monthly bill of £598.89 for 40% rate payers at current levels. Ouch.

What’s more, you wouldn’t be able to claim the VAT back on a Raptor, and you’d also face fuel benefit charges at the higher car rate as well. A triple whammy.