Light Commercial Vehicle (LCV) Tax
LCV taxes are much simpler than car tax rates. The Vehicle Excise Duty (VED) rate is cheaper, and most vans are charged at the same rate regardless of size, CO2 emissions or if it’s a petrol or diesel vehicle.
wHAT IS A LIGHT COMMERCIAL VEHICLE?
Light Commercial Vehicle is a catch-all term, covering all vehicles up to a 3500kg ‘revenue weight’. They are generally charged the Van Tax rate.
You can check the European Classification section in the vehicle’s V5C logbook.
- N1 or N2: The vehicle is classed as a LCV and is taxed as a van
- M1 or M2: The vehicle is a car and is subject to car road tax rates
vehicle excise duty (ved)
(Also known as Road Fund Licence, car tax or road tax)
Petrol and diesel vans registered on or after 1 March 2001 are charged a flat rate of £320 for 12 months (2023/24).
Electric vans are charged £0, however, from 2025, the current VED exemption for zero-emission vans will move to the rate for petrol and diesel light goods vehicles.
Essentials Tip: statutory off road notice
Registered vehicles that are not being used or parked on public roads and which have been taxed since January 31, 1998, must be covered by a Statutory Off Road Notification (SORN) to avoid VED and insurance payments.
lcv BENEFIT CHARGE (BENEFIT-IN-KIND)
The Van Benefit Charge applies when an employee is provided with a company van for business and personal journeys.
The Van Fuel Benefit Charge applies where fuel is provided by the employer to cover private use.
| LCV Benefit-In-Kind (2023/24) | |||
|---|---|---|---|
| BIK Rate | 20% Taxpayer | 40% Taxpayer | |
| LCV | £3,960 per annum | £792 (£66 per month) | £1,584 (£132 per month) |
| Fuel | £757 per annum | £151.40 (£12.62 per month) | £302.80 (£25.24 per month) |
| Electric Vans are currently exempt from the Van Benefit Charges | |||
HOW IS THE EMPLOYEE TAXED?
Drivers of company vans are treated as if they have received a monetary amount equivalent to the benefit of having the van. This taxable benefit is added to their income and taxed accordingly.
The employee’s tax code typically includes the taxable benefit which is collected monthly through PAYE. Any adjustments are normally made after the end of the tax year.
what counts as private use?
If the van is only used to go to and from places of work and commercially-related journeys, this is business use.
Some Insignificant private use is allowed within business use – for example, one-off trips to take items to a recycling centre or taking a small detour to pick up a newspaper on the way to work.
Using the vehicle to regularly do the weekly shopping or going away on holiday in are classed as private use and BIK must be paid on this.
sharing the costs
This charge can be shared between several employees if they all have access to the same van.
It can also be reduced if:
- The van remains unused for more than 30 days in a row
- The employer removes the private-use fuel provision partway through the tax year
- The employee pays the employer back for the cost of the private-use fuel
PICKUP TRUCK VED & BIK RATES
Most pickup trucks are treated as LCVs and follow the same flat BIK rate.
However, double cab pickups that cannot carry a 1,000kg payload are charged as company cars. This payload is increased to 1,040kg if the double cab pickup is fitted with a hardtop cover because these covers have a standardised weight of 40kg. These pickup trucks cannot claim the VAT back and will have to pay the car BIK and fuel benefit rates.
Car-derived lcvS AND COMMERCIAL 4X4s ved & bik rates
For car-derived vans (CDVs) and commercial 4x4s, check the European classification in the V5C logbook.
- N1 or N1: The vehicle is classed as an LCV and follows LCV rates
- M1 or M2: The vehicle is a car and is subject to car road tax rates
Generally, the interiors of CDVs and commercial 4x4s are redesigned or converted for carrying goods. This places them in the LCV category.
crew-/double-/combi-cab lcvs with more than one row of seats
BIK charges for vans with multiple rows of seats are more complicated. Multiple rows of seats imply that the vehicles’ use has switched from primarily transporting goods to transporting people.
Some people have argued if the van maintains a payload rating of 1,000kg then it’s still primarily a goods vehicle and should fall under the same dual-purpose rules as double-cab pickup trucks. However, a recent Court of Appeal ruling confirmed that if a van has more than one row of seats, its purpose cannot be described as “primarily for transporting goods”. This means they become subject to company car benefit in kind charges.
The long-term implications of this ruling remain to be seen but it is safer for businesses to treat these vehicles as company cars in relation to BIK.