Car wash businesses operate under specific tax rules, particularly around vehicle use, business rates and environmental charges. Here is how road tax interacts with the car wash industry.
Mobile Car Wash Vehicles and VED
Mobile car wash businesses that use dedicated service vehicles need those vehicles taxed like any other business vehicle. If the vehicle is a van used to carry equipment and water, it is taxed as a goods vehicle at the van VED rate of £290 per year. If it is a car, it is taxed based on CO2. Using trade plates for a vehicle that carries equipment is not appropriate — trade plates are for vehicles being tested, demonstrated or moved between premises for the motor trade.
Business Rates for Car Wash Premises
Car wash businesses operating from fixed premises pay business rates on their premises, similar to any retail or service business. Business rates are calculated on the rateable value of the property and are separate from road tax. The water recycling and environmental permits required by car washes also have associated costs, but these are not road tax-related.
Environmental Charges and VED
Car wash businesses using significant amounts of water may face environmental levies or consent charges from the Environment Agency or local water company. These are not related to road tax but represent a significant business cost. Some car washes pass these costs on through pricing, but there is no direct road tax implication for the business or its customers.
Company Cars for Car Wash Employees
Car wash operators who provide company cars to employees — such as managers or sales staff — must handle company car BIK tax correctly. The employee pays BIK on the benefit value based on the vehicle's CO2 emissions. The employer reports this via PAYE. Check HMRC's company car tax guidance for current rates.