Income Tax changes to the van benefit charge and fuel benefit charges for cars and vans from 6 April 2020
Published 11 March 2020
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Who is likely to be affected
Employers and employees, where employers provide employees with company vans available for private use, or provide fuel for private mileage in company cars and vans.
General description of the measure
This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2020. The flat-rate van benefit charge will increase to £3,490, the multiplier for the car fuel benefit multiplier will increase to £24,500, and the flat-rate van fuel benefit charge will increase to £666.
Policy objective
The measure ensures the tax system continues to support the sustainability of the public finances. Employers will be able to make the necessary changes to payroll systems and tax codes will be updated where appropriate, in advance of the 2020 to 2021 tax year. It also allows tax codes to be updated in advance of the relevant year where appropriate.
Background to the measure
The measure was announced on 2 March 2020 by Written Ministerial Statement.
Detailed proposal
Operative date
The changes will have effect on and after 6 April 2020.
Current law
The Van Benefit and Car and Van Fuel Benefit Order 2018 (SI 2018/1176) set the charges for 2019 to 2020. It set the van benefit charge at £3,430, the car fuel benefit multiplier at £24,100 and the van fuel benefit at £655.
Proposed revisions
Legislation will be introduced by statutory instrument, amending sections 150(1) and 161(b) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) to increase the cash equivalent of the fuel benefit charges for cars and vans respectively based on the September 2019 Consumer Price Index figure. The value of the multiplier for calculating the cash equivalent of the fuel benefit for a car will increase to £24,500 for 2020 to 2021. The flat rate charge for the van fuel benefit will increase to £666 for 2020 to 2021.
The cash equivalent where a van is made available to an employee for private use will increase to £3,490 for 2020 to 2021 by making an amendment to section 155(1B)(a) and (b) of ITEPA.
Summary of impacts
Exchequer impact
Van benefit charge
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Van fuel benefit charge
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| - | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Car fuel benefit charge
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
|---|---|---|---|---|---|
| - | +5 | +5 | +5 | +5 | +5 |
These figures are set out in Table 2.1 of Budget 2020 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document alongside Budget 2020.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will impact individuals who use a company van which is available for their private use and/or who are provided with fuel for their private use by their employer. These charges are uprated each year and are in line with expectations. It is anticipated that these individuals will pay more tax as a result of the increases.
This measure is not expected to impact on family formation, stability or breakdown as any tax increase is expected to be minimal.
Customer experience is expected to stay broadly the same because these are annual upratings which do not require customers to behave differently. Customers affected by these upratings will have to familiarise themselves with the increase in charges.
Equalities impacts
This is not expected to have any impact on groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on an estimated 50,000 employers and civil society organisations. One-off costs include familiarisation with the new rates and could include businesses having to update their systems to reflect the new figures for calculating the van benefit charge and the car and van fuel benefit charges. There are not expected to be any on-going costs.
Customer experience is expected to stay broadly the same because the method of reporting these charges remains the same.
This measure is not expected to impact civil society organisations.
Operational impact (£million) (HMRC or other)
These measures are estimated to cost HMRC in the region of £100,000 in order to implement the IT changes required.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
Regulations relating to the van benefit charge and the car and van fuel benefit charges are normally reviewed on an annual basis.
Further advice
If you have any questions about this change, contact the Employment Income Policy Team by email [email protected].