The tax treatment of double cab pickups is changing from April 2025, and businesses using these vehicles need to be aware of the financial impact. HMRC has confirmed that from this date, most double cab pickups will be classified as cars for tax purposes rather than commercial vehicles. This shift will affect benefit-in-kind (BIK) tax and capital allowances, leading to potential cost increases for businesses and employees.

Why are the rules changing?

Previously, double cab pickups with a payload of at least one tonne were classified as commercial vehicles. This meant they qualified for more favourable tax treatment, including lower BIK rates for employees and capital allowances for businesses. The new rules align the tax treatment of these vehicles more closely with cars, removing the current tax advantages.

How will benefit-in-kind (BIK) tax be affected?

The reclassification means a significant rise in BIK tax. For example, a new Ford Ranger with a list price of £49,654 currently has a BIK amount of £3,960. From April 2025, this will increase to £18,371. If taken with a fuel benefit, the BIK value rises further to £28,805 (£4,717 currently).

For a Scottish higher-rate taxpayer, this equates to a monthly tax cost of £1,008 (or £12,098 annually). Businesses will also face a 15% Class 1A National Insurance charge of £4,320 per year on the benefit, compared to the current £707.

Capital allowances: what changes?

Double cab pickups will be treated as cars rather than vans for capital allowance purposes, significantly reducing tax relief. The available allowance will drop to a maximum of 18% per year, depending on CO2 emissions (except for fully electric vehicles). For instance, a Ford Ranger will only qualify for 6% annual allowances, compared to the current allowance of up to 100% in year one.

However, existing capital allowance treatment will remain in place for pickups purchased before April 2025, up until April 2029.

What action should businesses take?

If you are considering buying or replacing a double-cab pickup, it may be worthwhile purchasing or ordering before April 2025 to take advantage of the current tax rules. Vehicles purchased, leased, or ordered before this date will continue under the existing system until the lease ends, the vehicle is sold, or April 2029—whichever comes first.

It’s important to note that there will be no changes to road tax or current VAT arrangements.

What should you do next?

Businesses should review their vehicle policies and seek professional advice to understand how these changes will impact their tax liabilities. Planning ahead can help mitigate increased costs and ensure compliance with the new regulations.

For expert guidance on how these changes could affect your business, get in touch with one of our team members today.