The UK tax landscape is set to undergo some significant changes that will impact businesses using double cab pick-ups.  It is important to be aware of the upcoming shifts in how they will be taxed.  Understanding these changes will not only ensure your business remains compliant but also help you make informed decisions about fleet management and tax planning.

What is Changing?

As of April 2025, the UK government will tighten the tax rules around the use of double cab pick-ups by employees.  These vehicles, often seen as a practical choice for both business and personal use, have been taxed differently compared to traditional cars due to their classification as commercial vehicles.

However, there has been growing concern at HMRC that these vehicles are being used for private purposes in a way that isn’t consistent with their commercial classification.

Key Changes to Tax Treatment

1. Definition change

Under the current rules, double cab pick-ups with a payload of one tonne or more are treated as vans for income tax purposes.  From April 2025, they will be treated as if they are company cars which typically attract a much higher taxable benefit in kind than company vans.

2. Benefit in kind – worked example

A double cab pick-up with a list price of £40,000 and CO2 emissions of 160g/km+

2024/25 – van treatment – total BIK £4,717 – total tax (@40%) £1,887

2025/26 – car treatment – total BIK £25,234 – total tax (@40%) £10,094

This represents over five times the tax on the previous treatment! If used for commuting and only occasional private use then increase is from point of no tax.

• Increased employers’ national insurance

Using the above example, employers’ NIC would be calculated as follows:

2024/25 – van treatment – employers’ NIC £708

2025/26 – car treatment – employers’ NIC £3,785

4. Lower capital allowances for businesses

New acquisitions of double cab pick-ups will no longer qualify for the annual investment allowance, which provides a full deduction against taxable profits.  Instead, they will only qualify for capital allowances at either 6% or 18% – depending on the CO2 emissions.  A 100% allowance is still available for new electric vehicles.

5. VAT rules unchanged

This means that on purchasing the vehicle, the business will still be able to reclaim the input VAT.

6. Transitional arrangements

Current rules continue to apply to vehicles purchased, leased or ordered before 5 April 2025 and will remain in force on that vehicle until the earliest of

6. 5 April 2029;
7. Expiry of the lease, or
8. Sale of the vehicle

How Will Businesses Be Affected?

1. Higher tax costs
   The immediate consequence of these changes is the increase in tax costs for businesses that use double-cab pick-ups as part of their fleet. The higher BIK charges will not only increase costs for employees but also for employers who cover these charges.
2. Operational adjustments
   Some businesses may need to adjust their fleet strategy. For example, construction firms or logistics companies that rely on double-cab pick-ups for their utility might start looking at other types of vehicles or rethinking how these vehicles are used within the business to avoid higher taxes.
3. Potential savings from electric vehicles
   Businesses that are already moving towards an eco-friendly approach or are considering future investment in electric vehicles could find these changes to be an additional incentive to make the switch.

What Should Businesses Do?

1. Review vehicle usage
   Companies should start by reviewing the current use of double-cab pick-ups within their fleet. Are they being used primarily for commercial purposes, or is there significant private usage? This will help businesses understand how they might be affected by the new tax rules.
2. Replace vehicles before April 22025

If near the end of its life/lease then may be worth looking at replacing it before new rules come into force.

3. Consider transitioning to electric vehicles
   As mentioned earlier, the government is providing various incentives for the use of electric vehicles. Companies that are eligible for these incentives might want to accelerate their transition to electric vehicles to reduce the impact of the tax changes.

Conclusion

The upcoming changes to the UK tax treatment of double-cab pick-ups mark a significant shift for businesses that rely on these vehicles. While the shift to a more stringent tax regime may be seen as a challenge, it also presents an opportunity to explore alternative, more tax-efficient vehicles.

By staying informed and taking proactive steps now, businesses can mitigate the impact of these changes and continue to operate efficiently and in compliance with the new rules.

These changes are complex, and it’s a good idea to consult one of our tax advisors to understand the full impact on your business. We can help you make sense of the new rules and identify any opportunities to reduce your tax liabilities.