Company van tax is applied to employees who use a company-provided van for personal mileage and unrelated to the business which provided the van to begin with.
If a company van is only used for work and for commuting to and from work, then there’s no tax for the employee to pay.
Until now vans registered after 2001 with a payload of at least a tonne have come with a flat rate Benefit-In-Kind (BIK) charge of £3,000. To work out your company van tax, you multiply this flat rate by your income tax band, either 20 or 40 per cent.
If free fuel is provided for your company van, then a fuel benefit charge multiplier is also added, up until now that has been set at £564.
Changes to company van tax from April 2014
In his Budget statement this month the Chancellor of the Exchequer, George Osborne, announced that the BIK on company vans will increase to £3,090 from April 2014.
This means that if you pay tax under the 20 per cent band, then your yearly company van tax charge is £618 a year, or £51.50 a month.
The fuel benefit charge multiplier for those company van drivers that get free fuel will also increase to £581. So those who pay tax under the 20 per cent band will pay £9.68 on their additional bill for free fuel.
The Chancellor also confirmed in his latest Budget statement, from April 2015 the van fuel benefit charge will increase again, in line with the rate of inflation.
Tax changes for zero emission vans
From April 2015, zero emission vans will begin to be taxed. However, the charge for company van tax on such vehicles will be gradually phased in and will not be applied to its full extent until April 2020.
It has also been announced that the Enhanced Capital Allowances scheme for zero emission goods vehicles will be extended until April 2018.
The Enhanced Capital Allowance scheme allows businesses to claim for the cost of purchasing a commercial vehicle which returns zero CO2 emissions.
The scheme, first applied back in April 2010, was originally due to expire in March 2015 but this no longer remains the case.
This scheme, however, is only available to businesses which do not claim the Government’s Plug-in Van Grant. The grant can save up to £8,000 on the purchase of a low or zero emission van.