🚐 Van Tax Rules for Contractors & Sole Traders - 2026 Guide

If you’re a contractor or sole trader and you’ve bought a van through your business, it can be a fantastic, tax-efficient asset - if you use it correctly. Get it wrong, and you could be hit with an unexpected tax bill.

This guide explains how to keep your van tax-efficient under the current 2025/26 rules that apply for 2026, and what’s changing soon.

✅ Use Your Van Only for Business Purposes

HMRC expects your business van to be used solely for business use.

That includes:

• Driving to client sites

• Picking up tools and materials

• Travelling to suppliers or work locations

• Commuting from home to your regular work site

This is all business use and is allowed.

⚠️ What Counts as Private Use?

Private use is anything not related to work.

That includes:

• Family trips and holidays

• School runs and errands

• Weekend shopping

Even occasional private use can trigger a tax charge. The safest option: keep your van for business use only.

💷 The Tax Charges if You Use Your Van Privately

If HMRC decides your van is available for private use, it’s treated as a Benefit in Kind (BIK). You’ll then pay tax on fixed “benefit” values, no matter how much or how little you use it privately.

📌 Van Benefit Charge (2025/26)

• Fixed taxable value: £4,020

• Tax cost:

  • Basic rate (20%): £804 per year

  • Higher rate (40%): £1,608 per year

⛽ Van Fuel Benefit Charge

If your business also pays for fuel you use on private trips:

• Fixed taxable value: £769

• Tax cost:

  • Basic rate (20%): £153.80

  • Higher rate (40%): £307.60

📝 Important: These charges apply even if you only make a few private journeys a year. HMRC counts availability for private use, not just actual use.

⚡ Electric Vans - A Tax-Free Perk

If your van is fully electric (zero emissions):

• No van benefit charge, even with private use

• No fuel benefit charge, even if your business pays for charging

This makes electric vans a highly tax-efficient choice, especially if you’re planning an upgrade soon.

🛻 Warning: Double-Cab Pick-Ups (DCPUs)

From 6 April 2025, many double-cab pick-ups are no longer classed as vans for tax purposes. Instead, they’ll be treated as cars if their payload is under 1 tonne.

• This means much higher BIK tax charges apply.

• If you bought/leased/ordered the vehicle before 6 April 2025, you can keep treating it as a van until it’s sold, the lease ends, or 5 April 2029 (whichever comes first).

If you use or are planning to buy a pick-up, check its payload — this change catches out many people.

💼 Admin Change from April 2026 — Payrolling BIKs

From April 2026, all Benefits in Kind (including van and fuel benefit charges) will have to be processed through payroll each month, instead of being reported on a P11D once a year.

If you’re self-employed this won’t directly affect you, but if you operate a limited company and employ yourself through PAYE, your payroll software must be ready to handle this.

📌 Quick Checklist for Staying Tax-Safe

• ✅ Use the van only for business journeys

• ✅ Keep a mileage log or use a tracking app

• ✅ Avoid private use (even occasional errands)

• ⚡ Consider a fully electric van to avoid BIK charges

• ⚠️ Check DCPU payloads before buying

• 💬 If unsure, ask your accountant before using the van privately

💬 Final Word

Treat your van as a business tool, not a perk. That way, you’ll avoid surprise tax bills and stay on the right side of HMRC.

If you’re unsure whether your current setup is correct, it’s always worth speaking with your accountant - a quick chat can save you a costly HMRC investigation later.