Reminder of upcoming changes to Double Cab Pick-Up Trucks by Sam Hart
A noteworthy detail in the Autumn 2024 Budget, which may have been overlooked, is the announcement that from April 2025, double cab pick-up trucks will be reclassified as cars for the purposes of:
Capital allowances
Benefits in kind (BIK)
Certain deductions from business profits
These changes will apply to vehicles purchased or leased on or after April 6, 2025, potentially increasing tax liabilities for both employees and businesses. In this article, we'll explain the new regulations, their impact, and offer advice on how to adjust.
What’s Changing?
Starting April 6, 2025, double cab pick-up trucks with a payload (the total weight they can safely carry, including passengers and cargo) of at least one metric tonne will no longer be treated as vans for BIK or capital allowance purposes. Instead, they will be classified as cars in accordance with recent case law and HMRC’s updated stance on tax legislation.
These changes will have several key effects:
Higher BIK tax rates for employees using these vehicles for personal purposes
Reduced capital allowance relief for businesses
VAT rules will remain unaffected, based on payload capacity
Let’s explore these impacts further.
Impact on Benefit-in-Kind (BIK) Taxation (England & Wales)
Currently, double cab pick-up trucks are classified as vans, attracting much lower BIK rates.
Here's a comparison:
Van BIK (2024/25):
Van BIK Rate: £3,960
Van Fuel BIK Rate: £757
Assessable Income: £4,717
Tax for a higher-rate taxpayer (40%): £1,887
Car BIK (2025/26) (after reclassification):
List Price: £40,000
CO2 Emissions Rate: 37%
Vehicle BIK Rate (£40,000 x 37%): £14,800
Fuel BIK Rate (£28,200 x 37%): £10,434
Assessable Income: £25,234
Tax for a higher-rate taxpayer (40%): £10,094
This shift represents a 432% increase in tax for employees at the 40% tax rate.
Capital Allowances: Reduced Relief for Businesses
Agricultural vehicles such as tractors and quad bikes will still qualify for the full Annual Investment Allowance (AIA), enabling businesses to deduct the full cost of the vehicle from taxable profits (up to £1 million).
Single cab pick-ups, which are considered commercial vehicles, will continue to be eligible for the AIA. However, for vehicles used both for business and personal use, only the business portion of the cost is deductible. For instance, if a self-employed individual purchases a £25,000 single cab pick-up and uses it 50/50 for business and personal purposes, only £12,500 would qualify for the tax deduction.
From April 6, 2025, double cab pick-ups will be treated as cars, and as such, will no longer be eligible for the AIA.
Instead, tax relief will depend on the CO2 emissions of the vehicle:
Zero-emission new cars: Eligible for 100% first-year allowance
Second-hand electric cars: Eligible for 18% of their value
Cars with CO2 emissions under 50g/km: Eligible for 18% of their value
Cars with CO2 emissions over 50g/km: Eligible for just 6% of their value
For sole traders and partnerships, private use of a commercial vehicle or car reduces the available tax relief, based on the proportion of non-business use. This could have a significant impact on tax savings for unincorporated businesses purchasing vehicles.
For companies, the full tax relief may still apply to the vehicle's cost, but if it's available for personal use by an employee or director, a BIK charge will apply.
Transitional Arrangements: Temporary Relief
If you purchase, lease, or order a double cab pick-up before April 5, 2025, you will be able to continue applying the current tax rules until one of the following events occurs:
The vehicle is disposed of
The lease expires
April 5, 2029, or
Whichever happens first
This transitional period provides some flexibility for businesses and employees who act before the deadline. However, long-term leases could still fall under the new rules if they extend beyond 2029.
VAT Rules Remain Unchanged
The good news is that VAT rules for double cab pick-ups will not change. Businesses will still be able to reclaim VAT on vehicles with a payload over one tonne.
What Should You Do Next?
To mitigate the financial impact of these changes, consider the following strategies:
Update or Replace Vehicles Before April 2025: If your double cab pick-up is nearing the end of its life, replacing it before April 2025 will allow you to benefit from the current tax rules until April 2029.
Explore Alternative Vehicles: Investigate whether a single cab pick-up or another commercial vehicle would better suit your needs while retaining more favourable tax treatment.
Limit Private Use: Vehicles classified as cars will face stricter private use regulations. To avoid higher BIK charges, ensure that:
Vehicles are stored at business premises outside of work hours
Vehicles are not covered by private insurance
Vehicles are used solely for business purposes
Seek Expert Advice: Consult with our tax experts to assess your fleet and ensure compliance with the new regulations, while optimising your tax position.
Final Thoughts
The announcement regarding the reclassification of double cab pick-up trucks in the October 2024 Budget echoes a proposal from earlier in the year. Although the proposal faced significant opposition and was initially reversed, the current announcement appears unlikely to be reversed again.
If you have any questions about how these changes could affect you, or if you need tailored advice, don't hesitate to reach out to our team today
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