Van tax guide: what drivers need to know

Van advice

12 November 2020

Taxing a van is slightly different to taxing a car. The main difference between van and car tax is how it’s calculated. How much car tax you pay is based on your car’s CO2 emissions, whereas van tax is charged at a fixed rate. To add to the confusion, the government has made several changes to van tax in recent years; both to van road tax (VED) and company van tax (BIK).

 If you’re not up to speed with how van tax works, you might fall foul of HMRC’s rules and end up with an unexpected and costly bill. But don’t worry, van tax doesn’t need to be taxing. Here, AXA summaries the information from the DVLA and explains everything you need to know about taxing a van.

 

Vehicle Excise Duty (VED): Road tax for van drivers explained

Vehicle Excise Duty (VED) is just another name for road tax (formerly known as a ‘tax disc’). It’s an annual tax and most vehicles in the UK need to pay it. Even if you’re exempt from paying for whatever reason, you still need to tax your vehicle. You can get a fine or penalty points on your licence if you’re caught driving a vehicle that isn’t taxed.

How much is my van road tax (VED) in 2020?

How much van road tax you need to pay depends on when your van was first registered. For vans registered before 2001, you’ll pay £165 or £270 as a single 12 month payment, depending on the van’s engine size. Vans registered on or after 1 March 2001 will pay £265 as a single payment. Euro 4 (registered 1 March 2003 – 31 December 2006) and Euro 5 (registered 1 January 2009 – 31 December 2010) van drivers need to pay £140 annually.

What tax band is my van in?

The table below gives an overview of the 2020 tax bands so you know how much you need to pay in 2020/21. (These figures relate to vans less than 3,500kg)

Vans registered before 2001

 

Vans registered on or after March 2001

Euro 4 and 5 vans

 

£165 for engines up to 1549cc

£270 for engines over 1549cc

 

£265 (£278.25 if paying monthly Direct Debit)

£140 (£147 if paying monthly by Direct Debit)

Visit the government’s website for more information about how much VED van drivers need to pay.  

What’s the difference between car and van road tax?

Cars are generally taxed based on CO2 emissions – the more it pollutes, the more you pay. Vans are a little different and the tax you pay depends on how old the vehicle is, but the engine size and it’s CO2 emissions rating are also taken into account.

How to pay road tax online

You can tax your van online by visiting the government’s website here. You’ll need to have a recent reminder letter (V11) from the DVLA, your vehicle’s log book (V5C), or the green ‘new keeper’ slip if you’ve recently purchased the van.

To pay your van tax online, you just need a debit or credit card. And if you’d rather spread the cost, you can set up a Direct Debit online, too.  

Cancelling your van road tax

You can cancel your road tax online by telling DVLA you no longer have the vehicle or that it’s off the road. You’ll get a refund for any full remaining months which is calculated from the date the DVLA gets your information.

You can only cancel your tax with the DVLA if your vehicle has been:

  • sold or transferred
  • taken off the road (e.g. keeping it in a garage) - this is called a Statutory Off Road Notification (SORN)
  • written offby your insurance
  • scrapped
  • stolen
  • exported out of the UK
  • registered as exempt from vehicle tax

 

Benefit in kind tax: a van driver’s guide  

If you drive a van for work and it’s provided to you by your employer, you’ll need to consider whether you need to pay benefit in kind (BIK) tax and how much that’ll be. If you’re an employer, it’s also a good idea to have a sound understanding of BIK so you can be armed with answers should your employees have any questions. 

What is a benefit in kind?

Benefits in kind are benefits that employees get but are not included in their salary. They are sometimes called perks or fringe benefits. They include things like company cars and vans, gym memberships and private medical insurance.

That’s why benefit in kind tax for vans is sometimes known as company van tax.

Benefit in kind tax for vans

Benefit in kind (BIK) tax is different for cars and vans. BIK for cars is based on the car’s CO2 emissions and the employee’s salary, whereas BIK for vans is charged at a fixed rate.  

What does HMRC class as a van?

HMRC defines a van as “A vehicle primarily constructed for the conveyance of goods or burden. A gross vehicle weight - fully laden - not exceeding 3,500kg.”

This definition covers:

  • panel vans with two or three seats in the front
  • chassis cabs fitted out with conversions
  • two-seat commercial SUVs and pick-up trucks

The rules for double-cab vans aren’t as straightforward so it’s best to check the van’s V5C registration document. If it says N1 or N2 it’s a van and M1 or M2 means it should be taxed as a car.

When do you need to pay benefit in kind tax?

If you only use your van for work, you don’t need to pay benefit in kind (BIK) tax. You’re also not expected to pay anything if your van is used mostly for work with the occasional essential detour as this is classed as 'insignificant private use'.

However, if your van doubles as the school run vehicle or you drive it on your days off, it’ll be taxed as a ‘perk’ and you’ll need to pay BIK.

How much benefit in kind van tax will I pay?

To work out how much benefit in kind tax you need to pay, you just multiply your income tax band (e.g. 20% or 40%) by the BIK tax value. The BIK tax value for vans is fixed at £3,490.

So, if you pay 20% income tax, you’ll pay £698 benefit in kind tax (20% of £3,490 = £698). And if you’re a 40% taxpayer, you’ll pay £1,396 (40% of £3,490 = £1,396.

Tax band

How much you’ll pay

20%

£696

40%

£1,396

The fixed BIK rate of £3,490 can be reduced if:

  • you can’t use the van for 30 days in a row
  • you pay your employer to use the van
  • other colleagues use the van – divide £3,490 by the number of people who use it

 

Fuel benefit: how much tax will I pay?

If you use a work van for private journeys and your employer picks up the fuel bill, you’ll also be taxed on that benefit. The benefit in kind rate for private mileage paid for by employers is fixed at £666 You just need to multiply it by your income tax band (e.g. 20%, 40%) to find out how much you owe HMRC.

Therefore, if you’re a 20% taxpayer, you’ll pay £133.20 (20% of £666 = £133.20 and 40% taxpayers will pay £266.40 (40% of £666 = £266.40).

Tax band

How much you’ll pay

20%

£133.20

40%

£266.40


Employees can avoid paying this, or it can at least be reduced, if: 

  • you can’t use the van for 30 days in a row
  • you pay your employer back for all private fuel
  • you stopped receiving money for fuel during the tax year

 

Electric vans: tax exemptions and incentives

Road tax (VED)

To encourage van drivers to go green, the government introduced electric van tax relief measures which means road tax (VED) for fully electric vans is £0.

Hybrid and plug-in hybrid van owners still need to pay the same VED as those who drive petrol and diesel vans.

Benefit in kind tax

The benefit in kind (BIK) tax rate is discounted for fully electric vans. The BIK rate for fully electric vans is discounted at 60% of the normal BIK fixed tax value.

Therefore, the fixed value for fuel benefit is £2,094 for electric company van drivers (60% of £3,490 = £2,094).

To work out how much you owe HMRC, just multiply it by your income tax band as you would for any other benefit in kind tax calculation.

Tax band

How much you’ll pay

20%

£418.80

40%

£837.60

If you’re thinking about making the switch, there are a number of electric van grants available. Check out the government’s website to find out if you’re eligible.  

 

 

Stay on track with AXA’s van insurance

Don’t let an unexpected bump in the road bring your plans to a standstill. Protection from AXA van insurance will steer you in the right direction so you can continue on the road to success.