Van benefit charge and fuel benefit charges for cars and vans from 6 April 2022
Published 27 October 2021
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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 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.
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 2022 to 2023 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 at Autumn Budget 2021.
Detailed proposal
Operative date
The changes will have effect on and after 6 April 2022.
Current law
The Van Benefit and Car and Van Fuel Benefit Order 2021 (SI 2021/248) set the charges for 2021 to 2022. It set the van benefit at £3,500, the car fuel benefit multiplier at £24,600 and the van fuel benefit at £669.
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 2021 Consumer Price Index figure. The value of the multiplier for calculating the cash equivalent of the fuel benefit for a car will increase to £25,300 for 2022 to 2023. The flat rate charge for the van fuel benefit will increase to £688 for 2022 to 2023.
The cash equivalent where a van is capable of emitting CO2 by being driven and is made available to an employee for private use will increase to £3,600 for 2022 to 2023 by making an amendment to section 155(1B)(b) of ITEPA.
Summary of impacts
Exchequer impact (£m)
Van benefit charge
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| — | +5 | +5 | +5 | +5 | +5 |
These figures are set out in Table 5.1 of Autumn Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2021.
Van fuel benefit charge
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| — | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Car fuel benefit charge
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| — | +5 | +5 | +5 | +5 | +5 |
These figures are set out in Table 5.1 of Autumn Budget 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2021.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
The terms used in this section are defined in line with the Office for Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth. You can request further details regarding this measure at the email address listed below.
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. Approximately 150,000 individuals are likely to be affected by the increase in the car and van fuel benefit charge. Approximately 100,000 individuals are likely to be affected by the increase in the van benefit charge.
This measure is not expected to impact on family formation, stability or breakdown as any tax increase is expected to be minimal. These charges are uprated each year and are in line with expectations. It is anticipated that these individuals could see increased costs, in line with inflation, as a result of the upratings.
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 measure will impact men more than women, as the majority of employees who make private use of employer-provided vans or are provided with fuel for private mileage in company vehicles are men.
It is not anticipated that this measure will have impacts on other 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 car and van fuel benefit charges. There are not expected to be any continuing costs.
Customer experience is expected to remain broadly the same as the method of reporting these benefits remains the same.
There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
The financial implications for HMRC in implementing this change are estimated to be in the region of £200,000 to update IT systems.
The measure will be implemented at no additional cost to other government departments.
Other impacts
The car and van fuel benefit charges provide a disincentive to drive excess miles in company vehicles. Since April 2021, the government has applied a nil rate of tax to zero-emission vans within van benefit charge. These measures maintain the environmental signal by increasing the charges in line with inflation.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
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, please contact the Employment Income Policy Team by email employmentincome.policy@hmrc.gsi.gov.uk.