Announced by Rachel Reeves in the 2024 Autumn Budget, the tax treatment for double cab pickups is changing. Due to be implemented in April 2025, these changes will have significant financial implications for those businesses that have grown accustomed to using double cap pickups as work vehicles.
Read on to discover what the changes are, the impact they will have on businesses, and what to do next for those concerned about the increasing costs.
What is a Double Cab Pickup?
Double cab pickups are vehicles designed with two rows of seats to accommodate up to five passengers, while still maintaining a rear cargo bed for transporting goods. As such, they’re widely viewed as very practical vehicles, capable of transporting multiple people around whilst still allowing space for carrying machinery, tools, and goods in the cargo bed.
They’re a popular choice of vehicle in industries like construction, farming, and delivery. Being a Cornish-based business, we know that the double cab pickup is pretty much ubiquitous on the rural back lanes of our county.
How Does HMRC View Double Cab Pickups?
Over the years the key question for HMRC has been: as a double-cab pick-up has the capability to both carry up to five people and carry goods, should the vehicle be classified as a car or a van?
Historically, double cab pickups with a payload of one tonne or more have been classified as light commercial vehicles (LCVs), meaning owners of these vehicles using them for business have benefited from favourable tax treatments. However, this classification is now set to change.
HMRC had previously announced that from 1st July 2024, ‘most if not all’ double cab pick-ups would be classed as cars, as “typically these vehicles are equally suited to convey passengers and goods”. However, this announcement caused an uproar among farmers and the motoring and construction industries, and as a result HMRC performed a swift U-turn.
The measure was then resurrected in October 2024 as part of the Autumn Budget, and as such from April 2025 HMRC will view double cab pickups as cars. This which will change how the vehicles are treated for capital allowances and benefit-in-kind taxation.
Change in Classification
- From 1 April 2025: For corporation tax, double cab pickups will be treated as passenger cars.
- From 6 April 2025: For income tax, double cab pickups will be treated as passenger cars for benefit-in-kind and profit deductions.
This has tax implications for:
- Capital Allowances: The rates at which businesses can claim tax relief on the depreciation of double cab pickups will change to follow the passenger car capital allowance model, potentially reducing the amount that can be written off annually.
- Benefit-in-Kind (BIK) Taxation: Employees using double cab pickups will now face car BIK rates, which are generally higher than those for vans, leading to increased tax liabilities.
- Deductions from Business Profits: Certain expenses related to double cab pickups may no longer qualify for deductions at the rates previously applicable to light commercial vehicles.
To summarise, unfortunately the shift from light commercial vehicle to car classification will lead to increased tax burdens in comparison with previous years for those business owners and individuals using company double cab pickups.
Next Steps
HMRC has announced a transitional period for the rule change, and as such businesses that purchase or lease a double cab pickup before April 2025 will be allowed to take advantage of the current benefit-in-kind rules until:
- The vehicle is disposed of
- The lease expires
- 5 April 2029 (whichever occurs first)
Proactive planning and consultation with tax experts, such as ourselves, is always a good first step to navigate these changes effectively. We can help you to determine which vehicles in your fleet will be affected by the reclassification and assess the financial impact. This may involve exploring the feasibility of transitioning to vehicles that maintain light commercial vehicles status or offer better tax efficiencies under the new rules.
