Drivers who use their company vans for personal use are paying four times as much tax as they were two years ago, according to new figures unearthed by accountancy firm UHY Hacker Young. In 2006/7, the HMRC only collected £10m in tax payments for drivers who used company vans for private mileage. In 2008/9, that figure was £40m, thanks to a change in the rules that came into effect in 2007.

What Changed?

In 2007, the rules on private use of company vans changed. Previously, private use of vans was given a benefit-in-kind value of £500 (£350 for vans over four years old). This meant that van drivers using their company vans for personal use only had to pay tax on £500 – for people on the standard 22% rate of income tax, this meant a charge of £110 per year.

In 2007, the benefit-in-kind value for private use of a company van was increased sixfold, rising from £500 to £3,000 (plus a further £500 if fuel is also provided). This meant that standard rate tax payers who used company vans for private mileage now had to pay an additional £660 per year – or £770 if their employer also paid for fuel for private use.

That Seems Unfair, Doesn’t It?

Such a big hike in tax over one year may seem unfair, but I think it’s pretty reasonable, really. Here’s why:

1. £770 a year is still a lot cheaper than having to buy and run another car. You are getting the benefit of using someone else’s van for personal use, after all. You aren’t paying maintenance, road tax or insurance charges for it (unless you are self-employed…).
2. Under the new system, van drivers pay a similar amount to company car drivers for the private use of their vehicles. Previously, van drivers paid much less than drivers of company cars, as a general rule.

Have you been hit by the increase in tax? Do you think it’s reasonable? Let me know in the comments below…