Getting up to speed with Pick Up tax changes
You may have read that in the Autumn Budget 2024 it was announced that there will be big tax changes for double-cab pick-ups, with a payload of one tonne or more.
From April 2025 they will be taxed as passenger cars instead of commercial vehicles. This reclassification will impact Benefit-in-Kind (BIK) rates, capital allowances, and expense deductions but why has this happened and what does all of this actually mean to you as a business?
We sit down with Sophie Thornton, our Direct and Corporate Account Manager, to find out more.The government previously said “double cab pickups are classified based on payload capacity, with anything under one tonne classified as a car, and anything a tonne and over as a van. This rule was replicated as a pragmatic way of resolving the primary suitability and classification of double cab pickups.” The change has been made because “typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.”
If you use a double-cab pick-up for any personal travel as well as business then you will face higher benefit in kind taxes, in line with normal car tax rates.
Historically all pick-ups were eligible and could claim full capital allowances which allowed you to reduce your taxable profit. Under the new classification it now means the capital allowances are at 18% on a writing-down basis, consistent with normal cars. The amount of deductible expenses is also reduced under the new rules.
Double-cab pickups purchased before April 2025 can apply the current BIK rules and capital allowances until the vehicle’s sale or until April 2029, whichever is earlier. Under current BIK rules double cab pick-ups are charged at a flat rate of £3,960 (like other light commercial vehicles) however now they will potentially have a higher tax obligation depending on the vehicle model and the taxpayer bracket you fall into.
It is also worth noting that while originally double-cabs were classed as having four doors capable of being opened independently, now the definition includes extended, extra, king or super cabs with “four doors, whether the rear doors are hinged at the front or the rear.”
One of the biggest points of confusion for our customers seems to be about how the VAT element will work going forward. We reached out to Stu Bell at Dodd & Co for clarification, he said “The existing beneficial VAT treatment that effectively treats double-cab pick-ups as vans will remain the same.”
This means VAT reclamation on vehicle payments is the same if the business is VAT registered and the pick-up has a payload of at least one tonne.
The new rules do not apply to single pick-up trucks as HMRC deemed them “clearly made for commercial use only”.