Tax FAQ
Private Use of Vans
My drivers use the company vans for a certain amount of
personal mileage. Is this classed as a benefit with tax
implications for my employees?
Before 6 April 2005, where vans had an element of private use
(journeys other than business), there would be a reportable benefit
for employees of £500 for vans under four years old, and £350 for
vans over four years old. The employees would pay tax at their
marginal rate through their pay via their tax code.
Since 6 April 2005, for employees using vans for private use
other than business journeys and hometo- work travel, the
reportable benefit remains the same. Employees may also use the van
for private insignificant journeys. The example the HM Revenue
& Customs uses is "like taking an old mattress or other rubbish
to the tip once or twice a year".
If your employees fall into this category, they will need to
keep good mileage records to prove this. There should also be a
signed agreement between the employer and employee. The definition
of a company van is one built to carry goods or other loads of up
to 3,500 kilograms.
From 6 April 2007, the reportable benefit changed. The charge
increased to £3,000 for vans used for private use. There is also,
for the first time, a £500 fuel charge for private use. With this
increase, employees will see quite a significant increase in their
tax charge, as these examples show:
2005-06
Van charge £500:
Tax @ 22% = £110 per year
Tax @ 40% = £200 per year
2007-08
Van charge £3000 plus fuel £500:
Tax @ 22% = £770 per year
Tax @ 40% = £1400 per year
An employee now paying tax on their van and whose marginal tax
is 40% will pay an extra £100 per month from tax year 2007/08.
Please read legal information.