Income Tax: van benefit charge and fuel benefit charges for cars and vans from 6 April 2023
Published 8 December 2022
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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
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 2023 and have been uprated annually since 2014. The flat-rate van benefit charge will increase to £3,960. The multiplier for the car fuel benefit will increase to £27,800. The flat-rate van fuel benefit charge will increase to £757.
Policy objective
These annual uprating measures, in line with expectations, ensure the tax system continues to support the sustainability of the public finances. In addition, these measures ensure that individuals continue to pay a fair amount of tax on valuable employment benefits. Employers will be able to make the necessary changes to payroll systems and tax codes will be updated where appropriate, in advance of the 2023 to 2024 tax year.
Background to the measure
These measures were announced at Autumn Statement 2022.
Detailed proposal
Operative date
The changes will have effect on and after 6 April 2023.
Current law
The Van Benefit and Car and Van Fuel Benefit (No. 2) Order 2021 (SI 2021/1422) set the charges for 2022 to 2023. It set the van benefit at £3,600, the car fuel benefit multiplier at £25,300 and the van fuel benefit at £688.
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 2022 Consumer Price Index figure. The value of the multiplier for calculating the cash equivalent of the fuel benefit for a car will increase to £27,800 for 2023 to 2024. The flat rate charge for the van fuel benefit will increase to £757 for 2023 to 2024.
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 £3,960 for 2023 to 2024 by making an amendment to section 155(1B)(b) of ITEPA.
Summary of impacts
Exchequer impact (£million)
Van Benefit Charge
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | +15 | +15 | +15 | +15 | +15 |
These figures are set out in Table 5.1 of Autumn Statement 2022 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2022.
Car fuel benefit charge
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | +10 | +10 | +10 | +10 | +5 |
Van fuel benefit charge
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| — | 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
Customer experience is expected to remain broadly the same as there is no change to how individuals interact with HMRC.
These measures are not expected to impact on family formation, stability or breakdown.
These charges are uprated each year 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. Customers affected by these measures will have to familiarise themselves with the increase in charges.
Equalities impacts
It is not anticipated that this measure will have disproportionate impacts on those with protected characteristics.
Impact on business including civil society organisations
These measures are expected to have a negligible impact on an estimated 50,000 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.
There is no impact on civil society organisations.
Operational impact (£million) (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 undertake private mileage 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
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 Cartlidge MP, Exchequer Secretary to 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.