January 2007

Van Drivers Hit by Tax Increase

Mitchells are warning company van drivers to be aware of a huge tax increase about to be introduced.

Benefit-in-kind tax on company vans used privately will increase by 600 per cent from April 6, 2007. The increase will affect any driver who uses his or company van for any private usage, other than employees who have to take their vans home (for example, who are on call) and who are not allowed any other private use. These drivers became exempt from any tax charge after the reform of company van tax started on April 6, 2005.

The news will result in large tax increases for those who think they have the ‘perk’ of private usage from a company vehicle. However it could be that they will simply be better off by restricting the private use of company vans to work journeys only.”

The government also announced that as a transitional measure, the benefit-in-kind charge of £500 (£350 for vans over four years old) will be continued for all vans where private use is unrestricted.

The 600 per cent increase being introduced in April will result in a £3,000 charge for unrestricted private use. In addition, if an employer provides fuel for unrestricted private use a fuel charge of £500 will also apply.

The changes follow a consultation exercise on van tax changes held last year.