A company van that only goes to work and home again, on terms that ban anything else, costs the driver nothing in tax. Let the same driver use it at weekends, on the company’s fuel, and it adds about £5,000 a year to their taxable pay. From April 2027 that difference shows up on every payslip.
That is what mandatory payrolling does. From 2027/28, employers will have to report company vans and van fuel through payroll and deduct the tax as the driver is paid, instead of on a P11D after the year end. Cars, car fuel and medical benefits move too, and most other benefits are due to follow in April 2028. Employment-related loans and accommodation stay outside the mandate for now.
The Budget on 28 October 2026 confirmed the date, with legislation to follow in the Finance Bill 2026-27 and the regulations still in draft. So it is announced policy, not yet law. It has slipped once already, from April 2026, and I would not bank on a second delay.
The van rules stop at 3,500kg design weight. Anything heavier counts as a heavy goods vehicle and sits outside these flat charges.
What a van costs in tax
If a driver can use a company van privately beyond the commute, the taxable benefit for 2026/27 is a flat £4,170, whatever the van is worth. Provide fuel for private use and a flat £798 van fuel charge sits on top. The Budget set those at £4,310 and £825 for 2027/28, due to be confirmed by statutory instrument. A zero-emission van carries neither charge. The employer also pays Class 1A National Insurance on the total, currently 15%.
When the charge is nil
There are two ways out. The first is the commuting rule. If the van is mainly for business travel, its terms ban private use other than ordinary commuting, and the driver keeps to that, the van benefit is nil. So is the fuel charge, even when a fuel card pays for the drive home. But for tax purposes the commute counts as private use, so a van that only ever goes home at night, with no written ban behind it, can still be taxed in full.
The second is insignificant private use: HMRC’s example is a slight detour for a newspaper on the way to work, and its manual talks of a few days a year at most. One trip to the tip probably passes. The Saturday football run every week does not.
Where fuel cards get caught
Fuel bought on a card counts as fuel you provided. On a van that passes neither test, any fuel card triggers a flat charge unless it is restricted to business journeys, which the commute is not. A driver who puts £30 of private diesel on the card and one who puts on £3,000 carry the same £798, or £825 from April 2027.
Otherwise it falls to nil only if the driver repays the cost of all their private fuel by 6 July after the tax year, and here too the commute counts as private, so repaying weekend fuel is not enough. Under payrolling, if you reasonably expect the driver to repay all of it, you report nil, and correct it later if they do not.
A card used for a driver’s own car is not van fuel, and separate rules apply.
What changes in the paperwork
From 2027/28 the P11D goes for vans and van fuel. Each pay period, payroll adds a share of the year’s benefit to taxable pay. Class 1A is reported on each Full Payment Submission and paid in real time, not in one sum each July. HMRC will take the van out of tax codes before April but still collect earlier underpayments, so some drivers may appear to pay twice.
For employers, summer 2027 is awkward. You still file the 2026-27 P11Ds by 6 July 2027 and pay that year’s Class 1A by 22 July, while the new real-time Class 1A is running. The July 2027 overlap belongs in your cash flow forecast now.
A worked example
An illustration, not a real driver.
A weekly-paid multi-drop driver in England on basic-rate tax, takes his diesel van home and uses it most weekends on the fuel card. On the 2027/28 figures:
• Van benefit of £4,310 plus van fuel of £825 gives £5,135 of taxable pay a year
• Over a 52-week year, payroll adds £98.75 to his taxable pay each week
• At 20% that is £19.75 a week in tax, or £1,027 over the year
• At the current 15%, his employer pays about £14.81 a week in Class 1A, or £770.25 a year
Put the same van on a written commute-only policy that Dean keeps to, and every number is nil.
Across 20 such vans, the 2026/27 Class 1A due by 22 July 2027 is £14,904, on top of about £296 a week under the new system.
Before April 2027
1. List every van, who drives it, whether it goes home and who holds a fuel card.
2. Write down each van’s private use rule, then check it against what the telematics show.
3. For private-use vans, choose between the flat fuel charge and drivers repaying all private fuel, commute included.
4. Agree payroll cut-off dates with your fuel card supplier.
5. Get your payroll provider to confirm it will report vans and van fuel from 6 April 2027.
6. Tell drivers that the tax is moving onto their payslips.
7. Budget for two lots of Class 1A in summer 2027.
8. Decide whether to payroll other benefits voluntarily, to avoid running two systems. Registration runs from 5 November 2026 to 5 April 2027.
Your payroll software will handle the mechanics. Whether a van costs a driver £5,135 a year or nothing comes down to the policy you write, and that needs doing before April.
Harvey Dhillon, founder and CEO, Zmartly
