Tax reforms associated with double-cab pick-up trucks
Following a U-turn by the previous government earlier this year, the decision to classify double-cab pick-up vehicles as cars for tax purposes was again revisited and confirmed last week as part of the budget. The result is that, from April 2025, double-cab pick-up vehicles with a payload of one tonne or more will be classified as cars.
This re-classification is significant, since it will remove the annual flat rate of £3,960 previously paid in benefit in kind (BIK) tax by custodians of these vehicle types and likely result in increases to their annual BIK bill.
Double-cab pick-up trucks are defined by HMRC as having a front passenger cab that contains a second row of seats and capable of seating 4 passengers plus the driver, together with four doors and a pickup area behind the passenger cab. Any vehicle with a payload of more than 1,000kg (or 1,045kg with a hardtop/canopy/truckman top) will be classed as a car from April 2025. Double-cab pick-up trucks with a payload of less than one tonne are already classed as a car and will continue to do so post April 2025.
Classifying double-cab pick-up vehicles as cars puts them at a disadvantage, due to their relatively high Co2 output. This figure is a key component of the BIK tax calculation, which requires the P11D value (manufacturer’s list price including delivery and VAT at time of registration) to be multiplied by BIK percentage banding and multiplying this figure by the employee’s tax band – e.g. 20% or 40%. This final figure is the annual tax.
Worked example under current system:
Ford Ranger Raptor 2.0L EcoBlue Double Cab Raptor 210PS Auto
P11D value: £48,741
BIK percentage charge: Fixed
BIK value: £3,960
Annual tax for 20% tax payer: £3,690 x 20% = £792
Annual tax for 40% tax payer: £3,690 x 40% = £1,584
Worked example using same vehicle from April 2025:
Ford Ranger Raptor 2.0L EcoBlue Double Cab Raptor 210PS Auto
P11D value: £48,741
BIK percentage charge: 37%
BIK value: £48,741 x 37% = £18,034.17
Annual tax for 20% tax payer: £18,034.17 x 20% = £3,606.83
Annual tax for 40% tax payer: £18,034.17 x 40% = £7,213.67
Note: the annual BIK tax calculation varies according to list price, BIK value and Co2 emissions. The value will therefore vary between individual vehicle specifications and it's worth checking these with the manufacturer.
Re-classifying double-cab pick-up vehicles as cars also puts them at a disadvantage for VAT-registered owners. Whereas before, owners of double-cab pick-ups could claim a percentage of the vehicles purchase VAT back, this is not possible for company cars unless it is used entirely for business purposes or as a pool vehicle i.e., used by all employees equally and not kept at an employee’s house overnight.
Despite the changes to double-cab vehicles with a payload over one tonne, it’s worth bearing in mind two-door, two-seat single-cab models and extended-cab models with two doors and four seats are exempt from these changes and continue to be taxed as commercial vehicles rather than cars.
For more information on BIK tax or any other aspect of accountancy speak to BALI member, Sones Accountancy Services, who specialise in bookkeeping and accountancy for the landscape industry.
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