Is a company van tax efficient?Thinking about getting a company van? We discuss whether it is tax efficient...
When looking at company vehicles, you are naturally going to want to opt for the most tax efficient option.
With the new company car tax changes coming into effect soon, tax efficiency is even more important than it was before.
We’ve already discussed whether a company car is tax efficient, but what about a van.
In this article, we look at how company car tax for a van is calculated, the benefits of a company vehicle and whether a company van is tax efficient.
How is company car tax for a van calculated?
When you have a company van, the tax is calculated differently than it is a car.
A company car is taxed via a sliding BIK rate. How much you pay depends on the CO2 emissions, the P11d value of the car and your personal tax bracket.
A company van, however, is taxed via a fixed BIK rate. This means how much you pay essentially depends on your personal tax rate. There are ways to reduce this fixed amount, but we’ll go into more detail about that later.
What counts as a van under the company car tax rules?
That is a very good question. According to the HMRC, a van must be;
- A vehicle primarily constructed for the conveyance of goods or burden
- A vehicle that has a gross weight – fully laden – not exceeding 3,500kg
Because they are designed to carry people, work buses and mini buses don’t count as vans. However, pickups could possibly qualify.
Does a pickup count as a company van?
If you aren’t quite sure whether a company van is for you, most double cab pick ups count as vans under the eyes of the HMRC. To qualify as a van, a pickup must;
- Have a payload of at least one tonne
- This does not include the hardtop cover
Luckily, many double cab pickups are designed to meet these HMRC requirements, meaning that they do qualify as vans and therefore qualify for the fixed BIK rates.
How to calculate company car tax for a van
Okay, so how do you actually calculate company car tax for a van or a pickup?
With a van, there is a fixed BIK rate of £3150. So, say you are in the 20% tax bracket, you will be paying 20% of £3150 which is £630 a year or £52.50 a month.
As you can see, this is significantly cheaper than if you were to get a company car, particularly if it has high CO2 emissions.
How can I reduce company car tax for a van?
When we talk about company car tax, we tend to then give you some top tips as to how to reduce your company car tax. It’s slightly harder with vans because it’s a fixed rate. There aren’t many steps you can actively take without drastically reducing the use of your company van. However, there are some things you can do.
You can reduce your company car tax for your van or your pickup if;
- You can’t use the van for thirty days in a row
- You pay your employer to privately use the van
- Other employees use the van
- You pay back your employer the private fuel
So those are the easiest ways to reduce your company car tax for a van.
What are the business benefits of a company vehicle?
So we’ve established how company car tax for a van is calculated and we know that it can be much cheaper to do this rather than get a company car or go privately. But, are there any more benefits to getting a company van?
Yes, there are. These can apply to both a pickup and a van, but do depend on what sort of finance agreement or lease deal you have.
If you have a van and have a limited company, you can offset 100% of the VAT. If you have a contract hire, then the vehicle can be “off balance sheet”.
So, there are other benefits that are available to you that wouldn’t be available if you had a company car.
Company car vs. Company van; which is more tax efficient?
If you have the option to choose between a company car or a company van, then you might be wondering which one is more tax efficient.
With a company car, your company car tax is calculated using a sliding BIK rate. This means it depends on a number of things, mainly the CO2 emissions and the P11d value of the car. As of April 2017, there will be more of these BIK rates introduced which means that you could end up paying quite a bit more in company car tax.
The same business benefits apply to a company car, however, so you do still get to enjoy those.
If we’re looking at what is more tax efficient, however, we would have to say a van. This is because there is a fixed BIK rate so it does not matter how much CO2 your vehicle emits or the P11d value. Unless you are looking at an electric car as your next company car, if you have the option of a van or a pickup then it may be more tax efficient.
So, after all that, is a company van tax efficient?
We would say so. The fixed BIK rate means that you could end up saving a fair bit of money plus the fact that a pickup can count as a van makes it even more appealing. Pickups are seriously upping their game at the minute, with more becoming as luxurious as some cars out there. Even if you don’t want a pickup and can opt for a van, you’d be better off doing that than going for a company car with higher emissions or a high P11d value.
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