The Government have announced tax changes for double-cab pick-up trucks with a payload of 1.0t or more. They have confirmed that these vehicles will be treated as cars from 1st April 2025 for Corporation Tax and 6th April 2025 for Income Tax. This will apply for the purposes of capital allowances, benefits in kind and some deductions from business profits.
What is a double-cab pickup?
According to the employment income manual (EIM23150), a double-cab pickup vehicle has:
- a front passenger cab that contains a second row of seats and is capable of seating about four passengers, plus the driver
- four doors capable of being opened independently, whether the rear doors are hinged at the front or the rear (two door versions are normally accepted to be vans), and
- an uncovered pickup area behind the passenger cab.
Impact on Benefit in Kind tax and National Insurance
Currently, double-cab pick-ups are treated as goods vehicles for tax purposes, granting them a flat rate Benefit in Kind tax rate. Cars are charged on a sliding scale based on emissions. Reclassifying double-cab pick-ups as cars will result in higher Benefit in Kind tax and National Insurance charges. This will impact both the employee and employer.
If there is no personal use on the vehicle, there will be no benefit in kind implications.
Impact on Capital Allowances
Currently, for sole traders, partnerships, and companies, a double cab pickup potentially qualifies for a 100% tax allowance on acquisition (under the £1m annual investment allowance), meaning the full cost can be set off against the taxable income in the year of purchase. Under the new regime, there will only be the option to write these vehicles down using the capital allowance rate for cars (currently 6% a year), so it will take much longer to obtain tax relief.
Transitional Arrangements
These changes will apply from April 2025, but HMRC have allowed for some transition. Where a double cab pickup is purchased, leased, or ordered before 05 April 2025, the old rules shall apply to that double cab pickup until the earlier of:
- Disposal of the vehicle;
- Lease expiration; or,
- 05 April 2029
From the point that one of these events occur, any new or existing double cab pickups will be treated as a car
Planning for the changes
If you are considering replacing your double cab pickup, you may want to consider doing this before April 2025 so that you can get the replacement vehicle under the current van rules and these shall apply until April 2029.
Consider the April 2029 transition cut-off date when considering finance options on the vehicle. A lease/hire purchase that goes past this point will likely mean that you will suffer these car tax charges at some stage.
The second hand value of double cab pickups may fall due to many of these vehicles hitting the market at a similar time, as businesses try to replace them before the changes.
To avoid the BIK charges, ensure that there is no private use on the vehicle. For example, the vehicle would need to be left at the office at the end of the day, the keys kept in the office, and insurance documentation confirming no private use.
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