On 27 October, the day of the Autumn Budget, HMRC published detailed information regarding their policy on the van benefit charge and fuel benefit charges for cars and vans. This new measure takes effect from April 2022.
This will be of interest to employers who provide their employees with company vans or fuel for private mileage in company cars and vans.
How many employees are affected?
According to HMRC statistics, there are approximately 150,000 employees that are likely to be affected by the increase in the car and van fuel benefit charge.
There will be approximately 100,000 employees that will be affected by £100 increase to the van benefit charge.
Vans & Fuel
The benefit charge for company vans will increase by £100 from £3,500 to £3,600 from next April. The benefit charge arises where the private use of the van in not insignificant.
Where an employer is providing fuel for private mileage in a company van the fuel benefit charge rises from £669 to £688.
Zero Emissions
The fuel benefit for company vans is to discourage excess miles being driven in a company vehicle. But company vans may be fundamental to the employer’s business. Therefore, since 6 April 2021, the government has applied a nil rate of tax to company vans within the van benefit charge where the van has zero emissions.
Company Car Fuel Benefit & tax changes
Where an employer provides private fuel for the company car, the fuel benefit is calculated by using the relevant CO2 emissions percentage to a multiplier. The car fuel benefit multiplier rises by £700 from £24,600 to £25,300 from April 2022.
The increase to the fuel benefit for company cars and vans is linked to the September 2021 Consumer Price Index (CPI) figure.
As part of the announcement HMRC has also confirmed that company car tax percentages will be frozen for three tax years from 2022/23 until 2024/25.
Please note that cars that are solely propelled by diesel attract a 4% supplement to the appropriate percentage according to the CO2 emissions. This is subject to a maximum percentage of 37%.
Where a company car meets the Real Driving Emissions 2 standard, they are exempt from the diesel supplement.
Here is a link to the company car tax percentage tables.
IT Update
The above information for vans and fuel has been released early to allow employers time to make the necessary changes to their payroll systems. It also allows the relevant employees’ tax codes to be updated by HMRC in advance of the new tax year.
The cost to HMRC in implementing this change is estimated to be approximately £200,000 to update their IT systems.
Legislation
Legislation for the above changes to the fuel benefit for cars and vans will be introduced by statutory instrument which will amend sections 150(1) and 161(b) of the ITEPA 2003.
The increase to the van benefit charge will be made by amending section 155(1B)(b) of the ITEPA.
Any Questions?
The Employment Income Policy Team at HMRC can be contacted with any questions relating to this change at: employmentincome.policy@hmrc.gsi.gov.uk
