Increase to van benefit charge and fuel benefit charges for cars and vans
Published 17 December 2024
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This publication is available at https://www.gov.uk/government/publications/income-tax-van-benefit-charge-and-fuel-benefit-charges-for-cars-and-vans-from-6-april-2025/increase-to-van-benefit-charge-and-fuel-benefit-charges-for-cars-and-vans
Who is likely to be affected
Employers and employees, where employers provide:
- employees with company vans available for private use
- fuel for private mileage in company cars and vans
General description of the measure
These measures are annual upratings that increase the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2025. The flat-rate van benefit charge will increase to £4,020. The multiplier for the car fuel benefit will increase to £28,200. The flat-rate van fuel benefit charge will increase to £769.
Policy objective
To uprate the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2025. The measure ensures the tax system continues to support the sustainability of the public finances.
Background to the measure
These measures were announced at Autumn Budget 2024.
Detailed proposal
Operative date
The changes will have effect on and after 6 April 2025.
Current law
The Van Benefit and Car and Van Fuel Benefit Order 2022 (SI 2022/1288) set the charges for 2024 to 2025. It set the van benefit at £3,960, the car fuel benefit multiplier at £27,800 and the van fuel benefit at £757.
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 2024 Consumer Price Index figure. The value of the multiplier for calculating the cash equivalent of the fuel benefit for a car will increase to £28,200 for 2025 to 2026. The flat rate charge for the van fuel benefit will increase to £769 for 2025 to 2026.
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 £4,020 for 2025 to 2026 by making an amendment to section 155(1B)(b) of ITEPA.
Summary of impacts
Exchequer impact (£ million)
Exchequer impact of uprating van benefit charge in line with Consumer Price Index (rounded to nearest £5 million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| — | +5 | +5 | +5 | +5 | +5 |
These figures are set out in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.
Exchequer impact of uprating van fuel benefit charge in line with Consumer Price Index (rounded to nearest £5 million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| — | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Exchequer impact of uprating car fuel benefit charge in line with Consumer Price Index (rounded to nearest £5 million)
| 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 |
|---|---|---|---|---|---|
| — | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
These measures are not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
These charges are uprated and are in line with expectations. It is anticipated that these individuals will see small increase in costs, in line with inflation, as a result of the uprating. Individuals will not need to do anything differently to what they currently do now as any increase will have already been calculated.
These measures are not expected to impact on family formation, stability or breakdown.
Customer experience is expected to remain broadly the same as there is no change to how individuals interact with HMRC.
Equalities impacts
HMRC does not hold data on the protected characteristics of people impacted by this measure, therefore the impacts on groups sharing protected characteristics cannot be determined.
Impact on business including civil society organisations
These measures are expected to have a negligible impact on employers and civil society organisations. One-off costs include familiarisation with the new charges and businesses will need 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.
Employers will be able to make the necessary changes to payroll systems and tax codes will be updated where appropriate, in advance of the 2025 to 2026 tax year.
Operational impact (£ million) (HMRC or other)
HMRC costs to implement this change are estimated at around £200,000 for IT system updates.
The measure will be implemented at no additional cost to other government departments.
Other impacts
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
These measures 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, contact the Employment Income Policy Team by email: policyemploymentbenefitsexpenses@hmrc.gov.uk.
Declaration
James Murray MP, Exchequer Secretary at The Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.