Company van vs company car: benefit in kind and tax compared (2026/27)

In short: In 2026/27 a company van's standard taxable benefit is £4,170, or nil if it cannot emit CO2, while a car is a CO2 percentage of list price (GOV.UK: van benefit). Taxley prepares the Company Tax Return (CT600) for £39.95 and files the accounts at Companies House once the return is paid and the accounts are finished.

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Key facts (checked on 21 October 2026)

Is a company van taxed less than a company car in 2026/27?

A company van is not always taxed less than a company car in 2026/27. A non-zero-emission van with unrestricted private use has a standard £4,170 benefit. A car is a CO2 percentage of list price, from 4% to 37%. A new zero-emission car can cost the director less than a diesel van of the same price.

The director pays Income Tax on the benefit, and the company pays Class 1A National Insurance at 15% of it for 2026 to 2027 (GOV.UK: employer rates). The flat van charge ignores price, so a diesel van in unrestricted private use all year is £4,170 whatever it cost. A car scales with list price and with CO2. A van can take the annual investment allowance and a car cannot (GOV.UK: business cars). Build, private use and profit each change which vehicle costs less. On its own, neither figure is a reason to buy a vehicle the work does not need.

How much is the van benefit in 2026/27, and when is it nil?

For 2026/27 the standard cash equivalent is £4,170 when the restricted private-use condition is not met. It is nil when that condition is met or the van cannot emit CO2 by being driven. Where private fuel is provided on the standard charge, a further £798 can arise; not when the van benefit is nil.

The Van Benefit and Car and Van Fuel Benefit Order 2025 took effect on 6 April 2026 for 2026-27 and later years, replacing £4,020 with £4,170 and £769 with £798 (the 2025 Order). A van that cannot in any circumstances emit CO2 by being driven is nil for 2021-22 and later years (ITEPA 2003 s.155). Fuel is charged only where it is provided for the employment, the employee is charged on the van, and the van is on £4,170 rather than nil. The fuel benefit is nil if private fuel is repaid by 6 July after the tax year, or if fuel is for business travel only.

Both parts of the test must hold while the van is available. The terms must prohibit private use other than ordinary commuting, or travel that is substantially ordinary commuting, and the employee and household must not make other private use. Only an insignificant slip in that private-use limit is allowed. The van must be available mainly for business travel (ITEPA 2003 s.155). Commuting alone is not enough. A slight detour to pick up a newspaper on the way to work can still be insignificant (GOV.UK: van exemptions). That same trip in a company car is private use, so an adviser should check the terms before the benefit is treated as nil.

What counts as a van, and are double cab pick-ups still vans?

For this benefit a van is a mechanically propelled road vehicle that is a goods vehicle, with a design weight not over 3,500 kilograms, and not a motor cycle. A goods vehicle is of a construction primarily suited to carrying goods or burden. A one-tonne payload does not, by itself, make a double cab pick-up a van.

Design weight is the laden weight the vehicle is designed or adapted not to exceed on a road (ITEPA 2003 s.115). For benefits from 6 April 2025, and Corporation Tax capital allowances from 1 April 2025, HMRC judges a double cab as a whole, not by payload. A typical one has a second row for about four passengers plus the driver, four doors and a separate cargo area. Two-door versions are normally vans. Where no predominant suitability is clear, the default is a car. A pick-up purchased, leased or ordered before 6 April 2025 keeps van benefit treatment, if the payload was one tonne or more, until disposal, lease expiry or 5 April 2029. The VAT payload test is unchanged (Employer Bulletin, April 2025).

How is company car tax worked out from its CO2 and list price?

Company car tax for 2026/27 is an appropriate percentage of list price. On the petrol and hybrid table, 120 to 124 grams per kilometre is 30%, zero emissions is 4%, and 155 grams and above is 37%. Class 1A National Insurance is 15% of that benefit for 2026 to 2027.

The 2026 to 2027 table gives 30% at 120 to 124g/km, 4% at 0g/km and 37% from 155g/km, on both emissions tests (GOV.UK: appropriate percentage). A £35,000 petrol car at 120g/km, available all year with no sharing and no private-use payment, is a £10,500 benefit. Class 1A at 15% is due on it (GOV.UK: employer rates). Ordinary commuting in a company car is private use (HMRC EIM23305). Diesel does not change the flat van charge, and this car is petrol, so no diesel supplement is added. See what a company can deduct for a car and the electric company car guide.

How do capital allowances differ for a company van and a company car?

A company can claim the annual investment allowance on a van, up to £1 million, and cannot claim it on a car. From April 2026 a car takes 14% a year up to 50g/km and 6% above that. A new unused zero-emission car bought before April 2027 can take 100%.

£35,000 is inside the £1 million limit if nothing else uses the allowance (annual investment allowance). Where the company provides the vehicle for a director, the claim is on the full cost, and a car cannot take that allowance (business cars). A petrol car over 50g/km takes 6%, so £35,000 gives £2,100 in year one. That 14% figure, from April 2026, is the main-rate writing-down allowance on a car of 50g/km or less. A zero-emission van bought in 2026/27 misses the goods-vehicle allowance, which needed a purchase before April 2025 (first-year allowances). Full expensing can give 100% on a new unused van from 1 April 2023 instead of the annual investment allowance, not as well as it. For a double cab the old allowance applies only to cost incurred before 1 October 2025 under a contract made before 1 April 2025 (HMRC CA23511).

How does VAT on a company van differ from VAT on a company car?

VAT draws a different line from the benefit rules. A vehicle with a payload of one tonne or more is not a car for VAT, and that payload test is unchanged. Recovery of VAT on a car is limited. Travel from home to a permanent workplace is personal use.

VAT on a new car or commercial vehicle might all be reclaimed if use is only for business and that can be shown (GOV.UK: reclaim VAT). Travel between home and work is personal use unless the workplace is temporary. A payload of one tonne or more means the vehicle is not a car for VAT (VAT Notice 700/64). On a car, business-only use means business journeys and no private availability, and a leased qualifying car normally blocks 50% of the VAT. Take advice before treating a mixed-use van as fully recoverable. The guide to VAT on company cars covers purchase, lease and charging. Taxley does not file VAT returns.

What does a £35,000 van cost in tax against a £35,000 car in 2026/27?

On these assumptions a £35,000 diesel van with unrestricted private use costs the director £1,668 of Income Tax in 2026/27 and the company £625.50 of Class 1A. The petrol car at 120g/km costs £4,200 and £1,575. Year-one Corporation Tax saved at 19% is £6,650 on the van and £399 on the car.

Both are available from 6 April 2026 for all of 2026/27, for one director, at a list price of £35,000 equal to the price paid, with no contribution, sharing or private fuel. The petrol car at 120g/km takes 30% (appropriate percentage). The director is assumed to pay 40% Income Tax on the whole benefit in England, Wales or Northern Ireland; Scottish rates differ (GOV.UK: employer rates). With no associated companies, the year 1 April 2026 to 31 March 2027 is financial year 2026. Profits of £40,000 before the allowance leave £5,000 or £37,900, both inside the £50,000 limit, so relief is at 19% (Corporation Tax rates). Class 1A is shown before any Corporation Tax relief.

Later, the car takes 6% of its reducing balance, a van benefit recurs in each tax year of unrestricted private use, and the allowance is not claimed again. Van fuel of £798 costs £319.20 in Income Tax and £119.70 in Class 1A (ITEPA 2003 s.161). Car fuel is 30% of £29,200, which is £8,760, so Income Tax is £3,504 and Class 1A is £1,314 (ITEPA 2003 s.150). A new unused zero-emission car at 4% of £35,000 is a £1,400 benefit, Income Tax of £560 and Class 1A of £210, below this diesel van. A 100% allowance before April 2027 saves the same £6,650 of Corporation Tax at 19%. The van's lower bill is against this petrol car.

When does a company van tend to suit, and when does a company car?

A van tends to suit a company that needs a goods vehicle and has profits to set an allowance against. A car tends to suit where the director needs a car, especially a new zero-emission car. Approved mileage on the director's own car is a third route.

Against this petrol car the director pays £1,668 rather than £4,200, with a much larger year-one allowance at this profit. Restricted private use removes the van charge and narrows the gap. A new unused zero-emission car bought before April 2027 can reverse it, because the benefit on £35,000 is £1,400 (appropriate percentage). A double cab ordered on or after 6 April 2025 may be a car for the benefit and the allowance (Employer Bulletin, April 2025). Approved mileage is the other route (director mileage guide). Take the vehicle and the private use to an adviser before ordering. The sums above use this level of profit.

What can Taxley file when a company buys a van or a car?

Taxley calculates the capital allowances when a limited company buys a van or a car, and files that company's Company Tax Return. The accounts go to Companies House once the return is paid and the accounts are finished. Benefit reporting sits outside the return. VAT returns and Self Assessment are not supported.

Taxley (taxley.co.uk), UK online software that prepares and files the Company Tax Return (CT600) with HMRC and the annual accounts with Companies House, records the cost, date and whether the asset was new or used. A van entered as a vehicle that is not a car can take the annual investment allowance. A car needs its CO2, zero if electric. A new unused zero-emission car takes 100% when the date qualifies. Other cars go to the main-rate or special-rate pool. The form categorises double-cab pick-ups bought from 1 April 2025 as cars, with a transitional checkbox for a payload of at least one tonne contracted before that date and paid before 1 October 2025 (HMRC CA23511). Enter the allowances manually and take advice if the vehicle's construction is clearly predominantly suited to carrying goods. Pay £39.95 with micro-entity accounts or £129 with small-company accounts. Taxley files the accounts at Companies House once the return is paid and the accounts are finished. It does not give tax advice or pay the Corporation Tax. See whether Taxley fits your company.

Frequently asked questions

Is a zero-emission van's benefit nil in 2026/27?

Yes, where the van cannot in any circumstances emit CO2 by being driven. For 2021-22 and later years, including 2026/27, the cash equivalent is nil (ITEPA 2003 s.155). A diesel or petrol van has a £4,170 standard charge before reductions unless restricted private use applies.

Does driving a company van to a permanent workplace always create a benefit?

No. Commuting can sit inside restricted private use if the terms limit other private use to ordinary commuting, that limit is kept, and the van is mainly for business travel. A slight detour to collect a newspaper can still be insignificant (van exemptions). The same commute in a company car is private use.

Do double cab pick-ups with a one-tonne payload stay vans from April 2025?

Not as a general rule. From 6 April 2025 for benefits, and 1 April 2025 for Corporation Tax capital allowances, HMRC assesses the whole vehicle rather than using the one-tonne test. A pick-up purchased, leased or ordered before 6 April 2025 can keep van benefit until disposal, lease expiry or 5 April 2029 (Employer Bulletin, April 2025).

Can a company claim the annual investment allowance on a car?

No. Cars are excluded from the annual investment allowance. A van can use the £1 million allowance because a van is not a car for that purpose (business cars). A car over 50g/km takes 6% a year. A new unused zero-emission car bought before April 2027 can take 100%.

Does the van benefit go on the Company Tax Return?

No. The benefit is an employment matter and is reported outside the Company Tax Return. Class 1A is the company's National Insurance on the amount. Taxley calculates the capital allowances in the return and files the return and the accounts.

General information, not personalised tax or accounting advice. Rates and rules checked on 21 October 2026.