UK Company Van Tax Guide 2026/27

Van BIK -- £3,960 Flat Charge

The company van benefit in kind is a flat rate charge set by HMRC each tax year, applied where an employee has unrestricted (or more than insignificantly restricted) private use of a van provided by the employer. In 2026/27 the flat charge is £3,960.

Unlike company cars, the van BIK does not depend on the vehicle's list price, CO2 emissions, engine size or age. A brand-new £40,000 van and a used £8,000 van both attract the same £3,960 charge. The employee pays income tax on the £3,960 benefit at their marginal rate:

The van BIK is included in the employee's tax code if the benefit is reported to HMRC via P11D (or payrolled through payroll from April 2026). HMRC adjusts the employee's tax code to collect the income tax through PAYE rather than requiring a Self Assessment return -- unless the employee is already self-assessing.

Van Fuel Benefit -- £757

An additional benefit in kind charge arises if the employer pays all fuel costs for a company van, including costs attributable to private journeys. The van fuel benefit charge is a flat £757 for 2026/27.

The fuel benefit charge does not arise if:

• The employer pays only for fuel used on business journeys (not private).
• The employee repays the full cost of private fuel to the employer.
• No private use of the van is permitted (restricted use exemption).

In practice, distinguishing business from private fuel requires accurate mileage records (business vs private). Many employers simply accept the fuel benefit charge as the cost of convenience. Employer Class 1A NI on the van fuel benefit = £757 x 15% = £113.55 per year.

Electric Vans -- £0 BIK

Fully electric vans (zero-emission electric vehicles classified as vans, with payload over one tonne) are exempt from the van benefit in kind charge. The BIK is £0 in 2026/27. The van fuel benefit charge is also £0 for electric vans (since fuel costs for electricity are not subject to the van fuel benefit rules).

This makes electric company vans highly attractive compared to:

• Conventional vans: £3,960 BIK + potentially £757 fuel = £4,717 taxable benefit
• Electric cars: 4% BIK on list price (e.g. £40,000 x 4% = £1,600 taxable benefit)

Employees using an electric company van pay no income tax on the van benefit and no fuel benefit. Employers pay no Class 1A NI. The electric van exemption has been renewed year on year and is expected to continue, though as with all BIK rates it is subject to change at fiscal events.

What Counts as Private Use

Private use of a company van means any use that is not for business purposes. Specifically:

• Home-to-work commuting -- driving from the employee's home to their regular permanent workplace and back. This is private use in HMRC's view, despite being connected to work. Many employees and employers assume commuting is business use -- it is not.
• Personal errands -- shopping, taking children to school, personal appointments made using the van.
• Weekends and holidays -- using the van for personal activities outside working hours.
• Family use -- allowing family members to use the van.

Business use means travel in the performance of employment duties -- visiting customers, travelling between worksites, deliveries, etc. Travel from a temporary workplace (not the regular place of work) to home may be treated as business travel, but this depends on the specific facts and the temporary-workplace rules.

Restricted Private Use Exemption

No van BIK charge arises if the employee's private use is "restricted to insignificant private use". HMRC sets a high bar for this exemption. Conditions required:

1. Written policy: the employer must have a clear written policy that prohibits private use of company vans (other than incidental private journeys).
2. Enforcement in practice: the policy must be actively enforced. HMRC can challenge the exemption where policies exist on paper but are not followed in practice.
3. No commuting: if the employee uses the van to commute to and from their regular workplace, the exemption does not apply -- commuting is private use.
4. Trivial private use only: minor incidental deviations (e.g., stopping at a petrol station during a business journey for personal items) may be ignored, but regular personal journeys cannot.

In practice, the restricted-use exemption is available mainly to employees who genuinely leave the van at work at the end of the day, do not use it at weekends, and make no significant personal journeys. Fleet managers should document the policy and keep records of compliance. HMRC audit of van benefits is an area of active compliance activity.

Employer Class 1A NI at 15%

Employer Class 1A NI is charged at 15% on the cash equivalent of company van benefits. For 2026/27:

• Van BIK: £3,960 x 15% = £594 per year
• Van fuel benefit: £757 x 15% = £113.55 per year
• Electric van: £0 x 15% = £0

Class 1A NI is reported on P11D(b) and payable by 19 July (22 July electronic) following the tax year. From April 2026, van benefits payrolled through payroll software (under the mandatory payrolling rules) are reported via RTI, but the Class 1A NI timing (July) remains unchanged for most employers.

Van vs Car -- Tax Comparison

The van BIK is almost always lower than the equivalent car BIK for mid-value commercial vehicles:

Note that electric cars have a lower BIK than a standard van for 2026/27. The van BIK advantage disappears at lower-value electric vehicles. Vehicle type classification (van vs car) is determined by the vehicle's primary purpose and payload, not its commercial appearance -- some SUVs and crew-cab vehicles are borderline and the classification should be confirmed with HMRC.

Employee Making Good the Benefit

An employee can reduce or eliminate the van BIK charge by "making good" -- paying the employer for the private use of the van. If the employee pays the employer £3,960 per year (or the pro-rated equivalent for part of a year), the van BIK is reduced to zero and no income tax or Class 1A NI arises on the van benefit.

Similarly, paying for all private fuel eliminates the fuel benefit charge of £757. Making good must be a genuine payment from employee to employer -- a paper adjustment or book entry without actual payment is not accepted by HMRC. In practice, making good the full £3,960 is equivalent to paying commercial van hire rates and is rarely chosen. The more common approach is to restrict private use genuinely and rely on the restricted-use exemption.

P11D and Payrolling Reporting

Van benefits have traditionally been reported on P11D forms submitted by 6 July following the tax year. From April 2026, under HMRC's compulsory payrolling of benefits rules, employers must payroll most benefits (including van benefits) through payroll rather than reporting on P11D. See the separate Payrolling Benefits guide for details.

Under payrolling, the van BIK value (£3,960 or £0 for electric) is added to the employee's payroll as an additional notional pay item, and income tax is collected through PAYE each month. The P11D form is not required for payrolled benefits. Class 1A NI remains due by 19 July regardless of whether benefits are payrolled or reported on P11D.

Worked Example

Employee A: trades electrician. Provided with a diesel transit van (£28,000 list price) with private use including commuting. Employer pays all fuel. Higher-rate taxpayer.

• Van BIK: £3,960
• Van fuel benefit: £757
• Total taxable benefit: £4,717
• Employee income tax at 40%: £1,886.80 per year (£157.23 per month via PAYE)
• Employer Class 1A NI: £4,717 x 15% = £707.55 per year

Employee B: same role. Provided with an electric LCV (£35,000 list price). Employer pays charging costs. Same tax rate.

• Van BIK: £0 (electric van exemption)
• Van fuel benefit: £0
• Employee income tax: £0
• Employer Class 1A NI: £0

Employee B saves £1,886.80 in income tax per year compared to Employee A. The employer saves £707.55 per year in Class 1A NI per electric van. Over a 3-year van lease, the employer's Class 1A NI saving is £2,122.65 per electric van compared to a conventional diesel equivalent -- a meaningful contribution to the TCO advantage of electric commercial vehicles.