Taxing your van: know what you need – or don’t need – to pay up
There’s no getting around it, put the words van and tax together and you’ve got a subject matter that can send even the greatest motoring enthusiast to sleep. But if you own or drive a van it’s in your best interest to keep your eyes wide open and set a couple of minutes aside to get to grips with the topic. The good news is it’s not as complicated as you’d think…
Back to basics
For tax purposes a company van is built with the intention of carrying goods and loads which has a ‘design weight’ of up to 3,500 kilos and is provided by an employer. As for the tax charge, van drivers typically pay less than their fellow car users and if they fall within a certain criteria, it’s even possible to pay nothing at all. Since 6 April 2005, some employees no longer have to pay tax on their company van unless it’s used for journeys other than between home and work.
However, the current tax charge for employees who use a company van for private use is £3,000. There’s also an additional £500 tax charge if free or subsidised fuel is provided for private use in a company van. Sounds awful, doesn’t it? But that charge reduces to nil if the employees drive the van mainly for business travel, and any private use, other than for journeys to and from work, is insignificant.
To make matters a little messy, the word ‘insignificant’ is not clearly defined, but HM Revenue & Customs say taking an old mattress or other rubbish to the tip once or twice a year is fine, as is regularly making a slight detour to stop at a newsagent on the way to work, or calling in at the dentist on the way home.
Not so insignificant
If an employee regularly uses the company van to do the supermarket shopping, takes it away on a week’s holiday or uses the van outside of work for social activities, the driver needs to reconsider the van tax band. The distinction is important because where there’s no tax charge on the van, there will be no National Insurance Class 1A charge either.
If you, or an employee of yours, qualify for the nil charge, then contact your local tax office so the tax code can be amended and the right amount paid under PAYE. And for extra savings, check you’re not paying over the odds by searching online for great deals on van insurance.
A final word of warning
The Inland Revenue may ask for proof the van’s not being used privately, so keep all records of mileage and if you’re an employer, ask employees to sign an agreement with regards to van use.