A charge to income tax will generally arise if a company van is made available, by reason of the employment, to an employee or to a member of his or her family or household. It must be made available without a transfer of ownership from the employer to the employee. Since 2016/17, when the £8,500 earnings threshold for most benefits-in-kind was abolished, the charge applies regardless of the employee’s earnings rate. The charge will however, be proportionately reduced if the van is only available for part of a tax year. The taxable amount of the van benefit may also be reduced by any payments made by the employee for private use.
Under the Government’s new timetable, any changes to tax rates, allowances and benefits are now generally announced in conjunction with the Autumn Budget each year. This approach is designed to allow employers time to make the necessary changes to payroll systems in advance of the start of the new tax year.
In relation to company vans, the 2018 Autumn Budget announced that, from 6 April 2019, the flat-rate van benefit charge will increase from £3,350 to £3,430, representing a small increase in real terms to a basic rate taxpayer of £16 a year. In addition, the flat-rate van fuel benefit charge will increase from £633 to £655 from 6 April 2019.
Zero emission vans
Between 2010/11 and 2014/15, there was no charge for zero emission vans. However, this exemption is now being phased out gradually between April 2015 and April 2022 such that from 2022/23, the full van benefit charge will apply to zero-emission vans.
Between April 2015 and April 2018 a rate of 20% of the van benefit charge for vans which emit CO2 applied to zero-emission vans. The reduction for the current and future years is set as follows:
- 2018/19 – 40% of van benefit
- 2019/20 – 60% of van benefit
- 2020/21 – 80% of van benefit
- 2021/22 – 90% of van benefit
From 2022/23, the van benefit charge for zero emission vans will be 100% of the van benefit charge for conventionally fuelled vans.
Whilst the nil benefit charge on vans is gradually being phased out, the Government continues to offer other tax incentives to promote greener travel. Autumn Budget 2018 announced that the period for which 100% first-year allowances (FYAs) are available to businesses for expenditure on plant or machinery for electric vehicle charging points, is to be extended. 100% FYAs will be available for expenditure incurred on or after 23 November 2016 up to and including 31 March 2023 for corporation tax purposes and 5 April 2023 for income tax purposes. The relief is subject to certain conditions, in particular, the expenditure must be on plant that is ‘unused and not second-hand’.
Given the tax incentives currently available, businesses thinking of buying or changing vans may wish to consider the options for electric, or types of zero emission, vehicles.