When it comes to vans, there are two main types of tax drivers need to be aware of: vehicle excise duty (VED) and benefit-in-kind (BIK) tax. Unfortunately, there isn’t a universal rate for these taxes and there are lots of variables that can affect the total amount owed.
To help you get your head around what needs to be paid – and to keep you on the right side of the law – this complete guide has all the information you need to know, from how to work out what you’re liable to pay to understanding tax exemptions.
Failing to stay on top of your taxes can lead to hefty fines and even restricted use of your vehicle. Find out all you need to know about taxing your van here.
What is vehicle excise duty?
VED – also commonly referred to as road tax – is the main type of tax van drivers need to be aware of; this is the tax that’s levied on most vehicles that use public roads in the UK. According to the Office for Budget Responsibility, VED is set to raise £9.4 billion in funds by 2027/28, a proportion of which will be spent on maintaining and improving the UK road network.
Similarly to cars, rates can vary depending on the classification of the vehicle. The factors to keep in mind include engine size, fuel efficiency, and the date it was registered. For example, a light goods vehicle (LGV) with an engine exceeding 1549cc registered before 1st March 2001 will currently incur a single 12-month payment of £345. Whereas tax on a Euro 4-compliant LGV registered between 1st March 2003 and 31st December 2006 is currently charged at an annual rate of £140. The rate for LGVs registered after 1st March 2001 that aren’t classified as Euro 4 or Euro 5 is £335.
From April 2025, VED on all vehicles is set to increase in line with the Retail Price Index. Keep updated with the DVLA website to ensure you’re paying the correct amount and avoid any costly penalties.
Van tax exemptions
There are a handful of circumstances where drivers are exempt from VED. If you receive one of the following disability benefits, you may qualify for exemption:
Higher rate mobility component of Disability Living Allowance (DLA)
Enhanced rate mobility component of Personal Independence Payment (PIP)
Enhanced rate mobility component of Adult Disability Payment (ADP)
Higher rate mobility component of Child Disability Payment
War Pensioners’ Mobility Supplement
Armed Forces Independence Payment
For drivers of multiple vehicles, it’s important to note that disability exemption can only be applied to one vehicle at a time, so you’ll need to choose which you want to use it for.
Other instances where you might not need to pay include on company vans that are used to provide transport for people with disabilities, and on vehicles manufactured before 1st January 1984. Historically, fully electric vans have also qualified for VED exemption, but this is set to change in 2025. From 1st January, electric vans will subject to the standard annual rate for petrol and diesel LGVs, which is currently £335. Euro 4 and Euro 5-compliant vans may qualify for a discount, but rates across the board are set to increase in line with RPI.
Company van tax
It’s a common perk for companies to offer employees use of a company vehicle. If you have access to a van registered to your employer, it’s important to be aware of the tax implications of using it.
If you use a company van to make ‘significant’ personal journeys, you’ll be liable to pay benefit-in-kind (BIK) tax. What constitutes a significant private journey according to the HMRC remains something of a grey area – it often comes down to the discretion of compliance inspectors. For instance, the odd stop off on the way to work likely won’t raise any red flags, but regularly doing the school run in your van will generally be deemed more significant.
Companies usually have their own ways of tracking vehicle use to ensure they’re in keeping with their tax reporting obligations, be it by monitoring mileage or with a fitted tracking device. If you’re in any doubt about how you can and can’t use your vehicle tax-free, reach out to your fleet manager.
When it comes to BIK tax, your personal tax bill will be calculated depending on your salary (and tax bracket). In 2023, the total flat-rate van benefit charge increased to £3,960: employees will be charged a percentage of this total in line with whichever tax band they fall into. So long as the vehicle is registered to your company, they will be liable to pay the VED.
Taxing a van: how to pay
The easiest way to pay your taxes is through the vehicle tax service on the UK Government website. When paying this way, you’ll need to have a reference number to hand, which can be found on any of the following:
a recent vehicle tax reminder or ‘last chance’ warning letter from DVLA
your vehicle log book (V5C) – it must be in your name
the green ‘new keeper’ slip from a log book if you’ve just bought it
If you don’t have access to any of these documents, you’ll have to apply for a new log book, which costs £25.
You can use a credit or debit card when paying your vehicle tax. You’ll also have the option to set up a Direct Debit if you prefer, but this method does incur a 5% surcharge when making monthly or bi-annual payments. The cheapest method is by paying for the full year upfront.
The online portal isn’t the only way you can pay your tax: other options include over the phone, though you can’t set up a Direct Debit this way, or over the counter at most Post Offices. You can use their branch finder tool to find your nearest store that accepts vehicle tax applications. Again, you’ll need to have either your VC5 log book or V11 (vehicle tax reminder letter sent by the DVLA) when paying at a Post Office.
How to cancel van tax
There are several instances where you may need to cancel your van tax. The most common are: your vehicle is no longer on the road, it’s been written off or scrapped, it’s been sold to someone else, or a change in circumstances means you’re now exempt from vehicle tax. Fortunately, you can get a refund on any full months of remaining tax by contacting the DVLA.
Using the DVLA’s online portal is the easiest way to apply for a refund; they’ll automatically calculate how much you’re owed and you’ll be paid via cheque within 6-8 weeks. This will be sent to the address on your VC5 log book, so it’s important to check this information is accurate before notifying the DVLA. It’s also worth noting that any credit card fees or surcharges added to your payments will not be refunded.
If you’re planning on taking your vehicle off the road and need a Statutory Off-Road Notification (SORN), this can also be done at most Post Offices.
What happens if I don’t pay van tax?
There are an estimated 719,000 unlicensed vehicles in the UK. Driving on public roads without paying vehicle tax will leave you liable to pay a fine and could result in your van being seized until the amount owed has been paid.
The maximum penalty for driving an untaxed vehicle is £2,500, if a case is pursued through the magistrates’ court. In most cases, if you’re caught using an untaxed van without a SORN, you’ll be issued a £30 fine plus one-and-a-half times the vehicle tax owed. You won’t get any points on your licence, but failing to pay this initial fine is a criminal offence, in which case you could be taken to court.
Even if you’re exempt from paying VED – due to a disability or having an electric van, for example – you still need to make an application to the DVLA, otherwise you could face a penalty.
Here to help
Whatever your circumstances, our team is here to help you understand all the tax implications of driving a van on UK roads. If you have any questions about your vehicle or want to find out more about the upcoming rate changes in 2025, get in touch with our knowledgeable team today.
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