What is vehicle excise duty?

Find out what you need to know about vehicle excise duty – or ‘road tax’ – for your van and see if you’ll need to pay any benefit-in-kind tax or fuel benefit charges for your work van.

Find out what you need to know about vehicle excise duty – or ‘road tax’ – for your van and see if you’ll need to pay any benefit-in-kind tax or fuel benefit charges for your work van.

Julie Daniels
Insurance expert
6
minute read
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Last Updated 22 FEBRUARY 2022

What is vehicle excise duty?

Vehicle excise duty (VED) – or road tax – is a tax that’s charged annually on nearly all vehicles driven or kept on public roads in the UK. You are legally required to make sure any vehicle you drive has up-to-date road tax. The tax is overseen by and paid to the Driver and Vehicle Licensing Agency (DVLA). 

You may be used to paying road tax on your car, but it’s calculated differently for vans. To avoid any confusion, we’ve put together a guide on all the ins and outs of taxing your van.

How is VED worked out for vans?

Unlike cars, which are taxed according to their fuel type and CO2 emissions, VED for vans is charged at a fixed rate, depending on three things: 

  • When your van was first registered
  • The size of your van’s engine
  • Your van’s CO2 emissions

What does HMRC class as a van? 

When it comes to road tax, HRMC don’t talk about vans, they talk about Light Goods Vehicles (LGVs). An LGV is defined as:

  • A vehicle that was designed primarily for the ‘carriage of goods’
  • A vehicle with a maximum authorised mass (MAM) of less than 3,500kg

MAM – also known as gross vehicle weight – refers to the weight of the van plus the maximum load of goods inside that can be driven safely on the road. You can check your van’s MAM in your owner’s manual and it’s also often shown on a plate or sticker attached to the vehicle.

When deciding whether your vehicle is a car or van for tax purposes, HRMC also consider the purpose and structure of your vehicle. The definition of an LGV above applies to panel vans with front seats only, chassis cabs, commercial SUVs, and pick-up trucks.

If you have a double cab van – one that was built with rear passenger seats and windows – in HRMC’s eyes your vehicle was designed primarily for carrying passengers rather than goods and it may fall under the rules of a car’s road tax.

It’s all a little complicated but luckily there is an easy way to check your vehicle’s classification - look for one of these vehicle category codes on your V5C registration document:

  • M1: passenger car
  • M2: bus or coach
  • N1: LGV
  • N2: heavy goods vehicle (HGV)
  •  O1, O2, O3 and O4: light and heavy trailers

How much does it cost to tax a van in 2022? 

The cost to tax your van in 2022 depends on when your vehicle was first registered, the engine size and whether it complies with Euro 4 or Euro 5 emissions regulations. 

Van category

Band

Single annual payment

Total cost when paying in 12 monthly instalments by direct debit

Single 6-month payment

Total cost when paying in 6 monthly instalments by direct debit

Van first registered before 1 March 2001 with engine size under 1549cc

TC11

£170

£178.50

£93.50

£89.25

Van first registered before 1 March 2001 with engine size over 1549cc

TC11

£280

£294

£154

£147

Van first registered on or since 1 March 2001

TC39

£275

£288.75

£151.25

£144.38

Euro 4 and Euro 5 compliant Van

TC36

£140

£147

£77

£73.50

How do I find out what band my van is in? 

To find out which tax band your van falls under you’ll need to know when your van was first registered. You can find this information on the DVLA website by entering your vehicle’s registration number.

If your van was first registered before 1 March 2001, it falls under tax band TC11. To find how much you’ll need to pay in tax you’ll also need to know the engine size. This should be detailed in your owner’s manual.

If your van was first registered on or after 1 March 2001, it falls under tax band TC39 – unless it complies with Euro 4 or Euro 5 emissions standards and qualifies for a discount.

Euro emissions standards define the acceptable limits for exhaust emissions of new vehicles registered in EU and EEA member countries within certain periods of time. Your van should meet Euro 4 standards if it was registered between 1 March 2003 and 31 December 2006, and it should meet Euro 5 standards if it was registered between 1 January 2009 and 31 December 2010.

What are the differences between car and van road tax?

Road tax for cars is calculated according to the car’s fuel type and CO2 emissions. The more your car pollutes, the more you’ll have to pay in tax to keep it on the road.

Road tax for vans is a little different. You’ll get a discount on your road tax if your van meets certain Euro emissions standards but otherwise, you’ll be paying a fixed rate depending on when your van was first registered, and in some cases, the size of your engine.

How to cancel road tax for a van 

You may want to cancel the road tax for your van for several reasons: 

  • You’ve sold or transferred your van to someone else
  • You’ve taken your van off the road and registered it as SORN
  • Your van has been written off by your insurance company
  • Your van has been scrapped
  • Your van has been stolen
  • Your van has been exported outside the UK
  • Your van is now exempt from vehicle tax

You can cancel your road tax through the DVLA’s online service and they will automatically cancel your direct debit. If you paid up-front, you should automatically get a refund cheque for any months remaining on your vehicle tax, although you’ll have to apply for a refund separately if your van was stolen.

What is a benefit in kind and why does this matter for van drivers?

If the company you work for has given you a work van to drive that you can also use in your personal life, it’s considered a perk of your job on top of your salary, and you’ll have to pay tax on it to HRMC. This tax is sometimes called benefit in kind (BIK) but you may have heard it called company van tax. 

If you only use your van for work, commuting and occasional detours during work hours (like for that mid-morning tea break) then you won’t need to pay any BIK on it. But if you also use the van to take the kids to school and for run-arounds on evenings and non-work days, then you’ll need to pay BIK. 

Your employer is legally required to report if their company van is being used for personal reasons. They may also keep track of mileage (or even fit tracking software) so it’s not a good idea to try and play the system.

How much benefit in kind van tax will I pay? 

To calculate how much BIK tax you’ll have to pay on your company van, you need to multiply the BIK value by your income tax band. In the 2021/22 tax year, the flat rate for use of a company van is £3,500, so you’ll need to pay the following BIK tax according to your income tax band: 

Your income tax band

How much BIK you’ll pay:

20%

£700

40%

£1,400

You could end up paying less if you share the van with one or more colleagues, you already pay your employer for use of the van, or you didn’t have use of the van for 30 days in a row or more. 

Another important thing to note is that if your company van is electric, you won’t have to pay any BIK – so that’s a bonus for you and the environment.

How do fuel benefits work for a van?

If your company pays the fuel costs for your work van, you’ll also need to pay tax on your fuel benefit. 

The fixed rate for fuel benefit for the 2021/21 tax year is £669. Like the BIK tax for use of the company van, you’ll pay a proportion of the fuel benefit value based on your income tax band:

Your income tax band

How much you’ll pay in fuel benefits

20%

£133.80

40%

£267.60

Like BIK, the amount you pay should be reduced if you already pay a contribution to fuel costs or you can’t use the van for more than 30 days in a row.

How are electric vans taxed? 

If you’re the owner of a fully electric van, congratulations. Not only are you doing your bit to save the environment, you’ll also be exempt from paying road tax. You’ll still have to tax your van, but you’ll pay £0 in tax. You’ll also pay £0 in BIK and £0 in fuel benefit charges on your fully electric company van.

Unfortunately, this tax break doesn’t apply for hybrid van models. You’ll still have to pay the same fixed rates as petrol and diesel van drivers for VED, BIK and fuel benefit charges.

Compare van insurance

Getting the right tax is only one of the steps you need to take before your van is ready to drive. You’ll need to make sure you have van insurance in place. Our easy-to-use comparison service can show you van insurance quotes from a range of providers to help you find a competitive deal on a policy that meets your needs.

Frequently asked questions

What happens if I’m caught driving without up-to-date road tax?

It’s almost impossible to get away with not paying your road tax because the DVLA regularly checks all vehicles registered in the UK. They’ll issue you with an initial fine of £80 if you fail to pay your VED in time and you haven’t declared your vehicle as SORN. If you’re caught driving an untaxed van by the police you could also be fined on the spot.

Who is exempt from paying road tax?

You may be exempt from paying road tax if you meet one of the following criteria: 

  • You have a disability – you can check if you qualify on the gov.uk website
  • You own a historic vehicle that was built before 1 January 1981
  • You own a fully electric vehicle

Remember that even if you’re exempt from paying. you’ll still have to go through the process of taxing your vehicle.

Can I pay road tax for my van online?

Yes, you can pay your road tax using the DVLA’s online service. You can use a debit or credit card or set up a direct debit. To get started, you’ll need a reference number from:

  • A recent reminder (V11) or ‘last chance’ warning letter from the DVLA
  • Your vehicle log book (V5C)
  • Or if you’ve recently bought the van, the green ‘new keeper’ slip from the log book

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