HMRC's New Legislation on Double Cab Pick-ups

In the Autumn Budget 2024, released on 30th October, HMRC announced a change in the tax treatment of double cab pick-ups. According to the new VAT rules, double cab pick-ups will be classified based on their payload capacity: those with a payload of less than one tonne will be treated as cars, while those with a payload of one tonne or more will be classified as vans. Starting from April 2025, vehicles purchased will be considered company cars for the purposes of benefit in kind (BIK), capital allowances, and certain business profit deductions, and will be subject to higher tax rates.

What are the key changes and how do they affect double cab pick-ups?

Benefit in Kind (BIK)
From 6th April 2025, double cab pick-ups will be reclassified from commercial vehicles to cars for BIK purposes. As a result, they will no longer be subject to the previous flat rate of £3,960. Instead, they will follow the BIK rates for cars, which range from 2% to 37%, depending on the vehicle’s CO2 emissions. Electric double cab pick-ups with a payload of over one tonne will face a BIK rate of 3%, which will increase by 1% annually until 2028.

Capital Allowances (CA)
Capital allowances, which allow businesses to deduct the cost of assets (like vehicles) from taxable profits, will also be affected. Starting from 1st April 2025, double cab pick-ups will be treated as company cars for capital allowance purposes. This means they will no longer be classified as "plant and machinery" but will instead be subject to company car rates, ranging from 6%, 18%, to 100%, based on the vehicle’s CO2 emissions.

Transitional Arrangements
If you own, plan to purchase, lease, or order a double cab pick-up before 6th April 2025, a transitional period has been introduced. During this period, you will retain the current tax treatment until the earlier of the vehicle's disposal, lease expiry, or 5th April 2029. This transition ensures that double cab pick-ups purchased before 6th April 2025 will remain classified as commercial vehicles for BIK purposes. You will need to provide evidence, such as a contract or order confirmation from the supplier, to demonstrate that the vehicle was purchased, leased, or ordered before this date.

Why are these changes being made?
The changes stem from a ruling in the Court of Appeal in the case of Payne & Ors, which determined that double cab pick-ups are equally suitable for carrying both passengers and goods, and therefore do not demonstrate a predominant commercial use. As a result, these vehicles will now be treated as company cars for capital allowances, BIK, and certain business profit deductions.

Will single cab or extended cab pick-ups be affected?
No, single and extended cab pick-ups will not be impacted by these changes, as HMRC has determined they are clearly suited for commercial use.

What if I purchase a double cab pick-up after the transitional period?
After 6th April 2025, any double cab pick-ups purchased, leased, or ordered will be subject to the new tax rules, including the revised treatment for BIK, capital allowances, and business profit deductions.

Will these changes affect the VAT reclaim status of double cab pick-ups?
No, the VAT treatment of double cab pick-ups will remain unchanged. Any double cab pick-up with a payload over one tonne will still qualify for VAT reclaims if the business purchasing it is VAT registered. These legislative changes will only impact capital allowances, BIK, and business profit deductions.

Hurry and grab your new Isuzu and Maxus from Sherwoods today before it's too late – don’t miss out on this opportunity!