Van (LCV) Benefit in Kind taxation 2024 to 2025: technical advice note

Tax Advice: The Welsh Government Energy Service does not provide tax advice. This technical note is an advisory and you should seek professional tax advice before committing to a particular course of action.

If an organisation provides an employee with a van (light commercial vehicle up to 3.5 tonnes – DVSA category N1) that can be taken home and used for journeys normally classified as private the employee may be liable for Benefit In Kind (BIK) income tax. The employer may also be liable for the National Insurance Contribution (NIC) on that BIK.

Journeys that may fall into the category “private” include the commute to work as well as personal use of the vehicle outside of work.

This guide is not definitive, relates only to the tax years 2023/24, 2024/25 and 2025/26. These rates and exemptions may be changed by future budgets.

Where there is no private use of a van (even if kept at home where home is the employees normal base because they do not have a fixed workplace) there is no liability for BIK taxation.

HMRC specifically excludes “insignificant private journeys” and gives as an example a “slight detour to buy a newspaper”.

Pool vans are also exempt, but they must meet the following requirements:

• available for use and are used by more than one employee
• available to each employee because they need it to do their job
• not ordinarily used by one employee to the exclusion of others
• not normally kept at or near employees’ homes
• used only for business journeys - limited private use is allowed, but only if it’s incidental to a business journey, for example driving home to allow an early start the next morning

If an employee is allowed to make use of the van for private journeys. For example, to do the shopping of an evening after returning from work, to go to the recycling centre at the weekend, or for any other type of private journey outside of normal working hours then the van is regarded as a benefit in kind and is taxable. Even if the employee doesn’t use the van at all for private journeys the charge is based on them being allowed to use it.

If the employer has provided a fuel card for the van, allows private use, and the employee does not reimburse the organisation for their private mileage, then that too is a taxable benefit.

For 2023/24, 2024/25 and 2025/26 the BIK standard value of a conventionally powered (petrol, diesel, gas) van is £3,960. This is set by HMRC and is unrelated to the size or the value of the van.

The employee pays tax at their nominal rate on the £3,960 which is effectively added to their salary, and the employer will pay NIC on the same amount (13.8% in 2023/24).

Zero emission vans (battery electric or hydrogen fuel cell but not plug-in hybrid) must still be reported, and the value is still £3,960 but the nominal rate is currently 0%. This requirement to report zero emission vans suggests this zero rating might change in the future.

HMRC states: “You need to report the zero-emission van on the P11D at 0% of £3,960 which is £0.”

If there is private use of fuel, then the standard value until 2025/26 is £757. The employee pays income tax at their standard rate on this amount, and the employer pays NIC.

The provision of “fuel” for an electric van, if it is owned by the organisation, is not a taxable benefit even if there is private use.

The commute to work is not counted as private use if all other private use is prohibited and the van is made available mainly for the business use of the employee because they need it for their job.

So, providing an office-based employee with a van that they use for their commute but do not need for work is a taxable benefit. Providing a delivery driver with a van and allowing them to take it home when they have completed their delivery round is not taxable benefit even if they then use it to “commute” back to the depot in the morning.

In February 2024 the Government did announce its intention to tax pickups (like the Ford Ranger or Toyota Hilux) with a payload of one tonne or more as company cars from July 2024. However, within days of announcing this policy, it was reversed following protests from the motor and construction industry and is now subject to a consultation process. Note that pickups with a payload of under one tonne are already treated as cars as are vans that have been converted to crew cabs – but not vans supplied as crew cabs.

The following table shows the different taxation between an ICE and BE van of similar size.