As April approaches, businesses relying on double cab pick-up trucks need to prepare for significant tax changes. HMRC is reclassifying these vehicles from commercial vehicles to cars, with important implications for benefit-in-kind (BIK) tax, capital allowances, and business deductions.
For businesses using double cab pick-ups with a payload of one tonne or more, now is the time to act. The question is: What have you done with your pick-up to prepare for the upcoming tax shift?
What’s Changing?
Currently, double cab pick-ups with a payload of one tonne or more are treated as commercial vehicles for tax purposes. This allows businesses to:
- Claim full capital allowances in the year of purchase for corporation tax.
- Benefit from relatively low benefit-in-kind (BIK) tax charges for employees using these vehicles.
However, from April 1, 2025, the tax treatment will change:
- Capital Allowances: For vehicles acquired after April 2025, double cab pick-ups will be classified as cars, meaning capital allowances will only be available as writing-down allowances (either 18% or 6% per annum), rather than allowing a full deduction in the year of purchase.
- Benefit-in-Kind (BIK) Tax: The BIK tax will increase significantly, as it will now be calculated based on a percentage of the list price of the vehicle, which will likely result in a higher personal tax charge for employees and an increased Employer National Insurance Contribution (NIC) for the business.
- Private Use Definition: The rules around private use will become stricter for cars compared to commercial vehicles. For example, keeping a car at home is likely to trigger a P11D form, whereas there can be more flexibility with commercial vehicles.
Note for Electric Pick-Ups
New and unused electric double cab pick-ups will be eligible for the same tax reliefs available to electric cars, which could provide some opportunities for businesses looking to transition to more sustainable vehicles.
Transitional Arrangements
There are transitional arrangements in place that will allow businesses to continue using the current tax treatment for any vehicles acquired, leased, or ordered before April 1, 2025. This arrangement will continue until the vehicle is disposed of or until April 5, 2029, whichever comes first. This means if you’re thinking of ordering any new double cab pick-ups, it may be worth considering bringing this decision forward to before April 2025 to benefit from the current tax regime.
What About VAT?
The VAT treatment of pick-ups remains unchanged. Vehicles with a payload of one tonne or more will continue to be eligible for full VAT recovery.
What Have You Done With Your Pick-Up?
With the clock ticking, businesses should consider taking steps to prepare for the upcoming tax changes. The question is: What have you done with your pick-up to ensure your business is ready?
Here are some things to consider:
- Review Your Fleet: Take a close look at your fleet and assess whether double cab pick-ups are still the right fit for your business. Could alternative vehicles, still classified as commercial, be a better option going forward? A fleet review could help minimise tax liabilities in the long run.
- Tax Planning: Now is a good time to model how this change will affect your business. Work with your tax advisor to understand the impact on your cash flow, tax liabilities, and overall operations. While there may be limited actions you can take in the short term, planning ahead will help.
- Communicate With Employees: If your business provides double cab pick-ups as part of employee benefits, make sure to inform your team about the upcoming changes. Whether it’s adjusting payroll or rethinking your benefits package, clear communication will help manage expectations.
The MGroup Can Help
At The MGroup, we understand these changes can be complex. If you have any questions or just want a quick chat to understand the impact on your business, don’t hesitate to get in touch with Ollie Squire ACCA or one of our other tax advisors. While there may not be a lot of time to make changes before the April deadline, we’re here to provide guidance and help you understand your next steps.
We Are Interested to Hear What You Have Done
With the deadline approaching, businesses need to make decisions now. We are interested to hear what you have done, whether you’ve sold, traded in, kept, or made plans to replace your pick-up.
Ollie Squire, tax advisor at The MGroup, has already had several Oxfordshire-based SMEs discuss this issue with him, especially those in the building and construction sector.
“This change is creating a lot of questions for businesses that rely on double cab pick-ups, particularly within sectors like construction, where these vehicles are a key part of daily operations,” says Ollie. “It’s important that businesses start planning now to avoid unexpected tax consequences in the future.”
If you’re unsure about how these changes will affect your business, get in touch with us for a quick conversation. We can help clarify the impact and point you in the right direction to manage the transition.
Reach out to Ollie Squire or any of our tax advisors at The MGroup today.
We can offer guidance on how to understand these changes and prepare for the future, even if there’s limited time to act before April 2025.