How Much DVLA Tax Do I Have to Pay on Company Vans?

Are you a company van driver and want to know about DVLA tax?

This article will discuss what you need to know regarding DVLA vehicle tax for company vans.

We'll discuss whether tradespeople need to pay this tax, how much it costs, whether private fuel is taxable, and an array of other relevant topics.

What is DVLA Tax?

Taxation from the Driver and Vehicle Licensing Agency can apply to all vehicle users as a road tax. Of course, there can be exemptions where you will not need to pay this tax, but the taxation must still be registered even if it is £0.

Disability is an example of a DVLA tax exemption. You must register your DVLA company van tax (and pay any due) to avoid trouble with the agency.

Do Tradespeople Need to Pay Company Van Tax?

So, let’s get to the point…

If you are a sole trader, self-employed, or drive your van just for business purposes, you are not required to pay company van tax.

With that being said, if you’re an employee and use a company van for private use also, you are required to pay Benefit in kind taxation to HMRC (a.k.a. HM Revenue and Customs).

Wait, but what is ‘private use’ exactly?

To be precise, employees may, of course, bring their vehicle to and from work, but anything beyond this would be classed as private use. There is a bit of a grey area, though.

The odd doctor's visit or picking up a bite to eat on the way to work would be considered insignificant private use. However, using the van to pick up a family member would cross over into personal use.

How Much Does Company Van Tax Cost?

We’ll now look at what company van tax may come to in total.

To understand how you would need to pay for a company van tax, we first need to establish the total taxation (which may then be reduced to fit your tax rate).

On average, the Benefit-in-Kind or BiK tax rate for most vans stands at £3,500, and this applies in the 2021/22 tax year.

A company may face a lower BiK if an employee pays to use the van privately or if other employees also drive the van.

For you, the employee, though, you can calculate how much you are expected to pay (unless exemptions are applicable) with BIK value x Personal tax rate. For instance, if your tax rate is 20%, you would be paying around £700 per year.

If your company pays for private mileage fuel, there is a fixed BIK rate which is £669, much lower than the several thousand-pound figures previously discussed, meaning that if your personal tax rate is 20%, you'd be looking at paying just under £135 for the tax year.

How Much Tax is Required for an Electric Company Van?

Are you riding the wave of the future? If you have an electric van with your company, the BIK rate stands at 80% of the standard rate, meaning the BIK rate is £2,800 for the 2021/22 tax year. In turn, you would pay £560 with a 20% personal tax rate. For road tax, the electric company van tax has a set rate of £0.

Further, if you charge the company van on your property, then you’ll probably be entitled to a claim back on your energy bill as a business expense. All in all, electric van tax is more generous.

Is Private Fuel Taxable?

Yes, private fuel is taxable. Regardless of whether the fuel provided is for personal use, it will be taxed based on Chapters 11 and 12 of the PAYE tax code.

In section 160, it states that:

“employee or their family is required to and does cover all private fuel costs personally for the whole period for which the company vehicle is available to them” (Gov.UK 2021).

Does Company Van Tax Apply to Self Employed Tradespeople?

As mentioned earlier, a self-employed tradesperson or a sole trader is not required to pay company van tax unless you drive the van for private use (see 'Do tradespeople need to pay company van tax?').

Do Pool Vans Require DVLA Tax?

But what if it's a pool van or used for business journeys? Is there a pool van tax?

Well, here's the good news!... In this case, you won't need to report or pay any tax to HMRC, and thus there is no tax on a company van if it is a pool van.

Is my van definitely a pool van?

A pool van is defined as one which (with the company’s approval or/and direction):

1. It can be used by one employee or more
2. It May be used to every employee where it is needed for the job
3. A single employee does not generally use it to the exclusion of other employees
4. Will not usually be kept at or close to employees’ homes
5. It is used for business journeys only (notably, in this case, limited private use is acceptable. However, this is only if it is relevant to a business journey, such as driving the van home for an early start the following day)

As for business trips/commuting would be classed as travelling to a temporary place of work or if the trip is part of the worker's employment (e.g. service engineer driving from one appointment to the next). Once more, this does not include vans used for private use.

Also, you should note that you need to report fuel or vans if they are an element of a salary sacrifice agreement.

Sources

https://www.gov.uk/vehicle-tax
https://www.gov.uk/guidance/taxable-fuel-provided-for-company-cars-and-vans-480-chapter-13