With effect from 6 April 2025 HMRC have reclassified most double-cab pick-up trucks as cars for tax purposes, rather than vans. This change significantly impacts Benefit-in-Kind (BIK) taxation, capital allowances, and fuel benefit charges for both employers and employees.
What Is a Double-Cab Pick-Up?
A double-cab pick-up (DCPU) typically features:
• Four doors;
• Two rows of seats accommodating up to five passenger; and
• An open cargo area at the rear
Common models include the Ford Ranger, Toyota Hilux, and Isuzu D-Max.
Previous vs. New Classification of Double-Cab Pick-Ups
Previously:
• DCPUs with a payload of one tonne or more were classified as vans;
• This classification allowed for lower BIK tax rates and more generous capital allowances.
From 6 April 2025:
• Most DCPUs will be classified as cars for tax purposes;
• This reclassification is based on a 2020 Court of Appeal ruling emphasizing the vehicle’s primary suitability.
Note: VAT treatment remains unchanged; DCPUs with a payload over one tonne are still considered vans for VAT purposes.
Tax Implications of the Reclassification
1. Increased Benefit-in-Kind (BIK) Tax:
• Previously, a flat BIK rate applied to vans;
• Under the new classification, the benefit is calculated based on the vehicle’s list price and CO₂ emissions;
• High-emission DCPUs could attract BIK rates up to 37%.
Example:
• A £45,000 DCPU at a 37% BIK rate results in a taxable benefit of £16,650.
• For a 40% taxpayer, this equates to an annual tax charge of £6,660.
2. Reduced Capital Allowances:
• Previously, businesses could claim a 100% Annual Investment Allowance (AIA) on vans;
• Under the new rules, cars are subject to an 18% or 6% writing-down allowance (dependent on the level of CO2 emissions being no more than 50g/km), reducing upfront tax relief. Fully electric cars can claim 100% First Year Allowances.
3. Higher Fuel Benefit Charges:
• The taxable benefit for private fuel use will increase significantly;
• For cars, the fuel benefit is calculated using a multiplier (£28,200 for 2025/26) and the car’s BIK rate.
• For a DCPU at a 37% BIK rate, the fuel benefit is £10,434, leading to a £4,173.60 tax charge for a 40% taxpayer.
Transitional Relief Available for Taxpayers
For DCPUs purchased, leased, or ordered before 6 April 2025, the previous tax treatment as a van will continue until the earlier of:
• 5 April 2029;
• The vehicle’s disposal; or
• Lease expiry.
This relief provides a temporary buffer for businesses and employees to adjust to the new rules.
📋 What Action Steps are Recommended?
• Review Vehicle Fleets: Assess the impact on current and future DCPU holdings;
• Consider Alternatives: Explore vehicles that retain van classification or have lower CO₂ emissions;
• Consult Professionals: Engage with tax advisors to navigate the changes effectively.
If you need support with your tax, get in touch at partners@rjp.co.uk.