Having a vehicle to use for business purposes adds to the efficiency of your business. But should you opt for a company car or a company van?
Company vans are taxed in a far more favourable way than passenger cars in most cases. This is because both company tax relief and personal benefit-in-kind tax charges are more tax-efficient for vans; partly because of this, many business owners choose a van over a car.
What personal tax do you pay on a van compared to a car?
Personal tax for the use of a company car is charged on an annual amount of up to 37% of the list price, depending on the car’s CO2 emissions. On top of this, the same percentage is applied to a lump sum of £25,300 to cover fuel, which the employer provides.
When you use a van, that’s taxed at a value of £3,600 for the use of the vehicle, and on a further £688 where private-use fuel is provided. So as you can see, that can be far more tax-effective.
What makes a vehicle a ‘van’?
A van is defined as a vehicle designed primarily to carry goods, with a gross vehicle weight not exceeding 3,500 kilograms.
Generally, a vehicle with seats and side windows behind the driver’s seat will not count as a van, so however rugged your Land Rover Defender Station Wagon may be, it won’t matter. Nor will your motorhome.
In the case of double-cab pick-up vehicles, the rules are relaxed so that the payload exceeding 1,000 kilograms will still be classed as a van for fringe-benefits tax purposes. To calculate the load, where the vehicle has a hardtop fitted, this is assumed to reduce the payload by 45 kilograms. Because of this, you should think carefully when considering doing a hardtop to a vehicle with a rated load of fewer than 1,050 kilograms.
Are there other advantages to choosing a van?
If your van is only used privately for home-to-work travel but not for other non-work purposes, this travel is ignored, and no benefit-in-kind charge arises for you.
The favourable tax treatment isn’t the only bonus of a van. Vehicles classified as vans are also eligible for better treatment for capital allowances (including being eligible for the super-deduction capital allowance that’s currently available). In addition, you can also reclaim the VAT on purchasing the van, in the same way you can for VAT incurred on other business expenses.
Talk to us about buying a company van.
Choosing a van instead of a company car can often be beneficial from a personal and company tax perspective.
If you’re in the market for a company vehicle, we’ll help you understand the tax rules around the provision of company vehicles – so you make the right decision regarding buying a van or car.