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Cast your minds back to February 2024. The Conservative Government is trying to introduce hefty tax implications on pick-up trucks, but immediate opposition sees them back-down.
Remember that? Well, from April 2025 the hike in tax will be back. Pick-up truck owners can expect to see an increase of up to 236%!
What Does this Mean for Double-Cab Pick-Up Drivers in 2025?
Starting April 6, 2025, double-cab pick-ups (DCPUs) with payloads exceeding one metric tonne will be classified as cars for tax purposes. This means changes to:
- Benefit-in-Kind (BIK) tax rates, significantly increasing personal tax costs for employees using these vehicles for private purposes.
- Capital Allowances, reducing the tax relief businesses can claim when purchasing these vehicles.
This reclassification brings DCPUs in line with recent case law and updated interpretations by HMRC, leaving businesses and employees alike facing higher tax bills.
What Does this Look Like?
Having championed the Ford Ranger, and knowing a lot of our customers are driving them, here’s a short summary of how the nex tax implications may impact you.
- Current tax treatment (2024/25):
- Fixed Van BIK charge: £3,960
- Total tax cost for a higher-rate taxpayer (40%): £1,584 annually
- New tax treatment (2025/26):
- Based on CO₂ emissions (230g/km), taxed as a car at 37% BIK rate:
- BIK value: £22,200 annually
- Tax cost for a 40% taxpayer: £8,880 annually
- For a 60% taxpayer: £13,320 annually
- Based on CO₂ emissions (230g/km), taxed as a car at 37% BIK rate:
That’s an increase of over 236% for many DCPU drivers!
Who Will Be Impacted?
Employees and directors who use double-cab pick-ups for both business and private use, as they’ll face higher BIK charges.
Businesses purchasing or leasing double-cab pick-ups after April 6, 2025, as they’ll lose access to the generous capital allowances currently available for vans.
However, single-cab pick-ups, extended-cab models, and other commercial vehicles like tractors and quad bikes will retain their existing tax advantages.
What About in the Interim?
There is some relief for those who act before April 6, 2025:
- Transitional rules will apply to DCPUs purchased, leased, or ordered before this date. These vehicles will retain their van classification for tax purposes until:
- They are sold
- The lease expires
- Or until April 5, 2029
This means businesses and employees can lock in the current lower tax treatment for up to four additional years.
Capital Allowances: What’s Changing?
Under the new rules, businesses will face reduced tax relief when purchasing double-cab pick-ups. Here’s a quick comparison:
- Current Rules (2024/25):
- DCPUs qualify as vans, meaning businesses can deduct the entire cost under the Annual Investment Allowance (AIA) (up to £1 million).
- New Rules (2025/26):
- DCPUs will be treated as cars, with tax relief depending on CO₂ emissions:
- Zero-emission cars: Eligible for 100% first-year allowance.
- CO₂ ≤ 50g/km: Tax relief at 18% per year.
- CO₂ > 50g/km: Tax relief at just 6% per year.
- DCPUs will be treated as cars, with tax relief depending on CO₂ emissions:
For most DCPUs with high emissions, this means substantially reduced upfront tax savings, especially for small businesses and sole traders.
VAT Rules: The Silver Lining
One piece of good news is that VAT rules remain unchanged. Businesses can continue reclaiming VAT on double-cab pick-ups with a payload of at least one tonne, provided they meet the usual conditions for commercial vehicles.
What Can You Do Right Now?
To minimise the financial impact of these changes, here are some proactive steps to consider:
1. Replace Vehicles Before April 2025
If your current double-cab pick-up is nearing the end of its life, consider replacing it before April 2025. This allows you to lock in the current tax benefits under transitional rules until 2029.
2. Explore Alternative Vehicles
Consider whether a single-cab pick-up or other commercial vehicle might better suit your needs while retaining favourable tax treatment.
3. Limit Private Use
To avoid hefty BIK charges, ensure vehicles classified as cars are:
- Stored at your business premises outside work hours.
- Not insured for private use.
- Used strictly for business purposes.
4. Seek Expert Advice
Navigating these changes can be complex, so consult with a tax advisor or vehicle fleet specialist to optimise your tax position and ensure compliance with the new rules.
Sum it up, Summit!
This isn’t the first time tax rules for double-cab pick-ups have been in the spotlight. While the Government backed down on a similar proposal in early 2024, the latest announcement suggests they’re committed to implementing these changes from April 2025.
Although there’s always a chance of further amendments, it’s safest to plan as though the rules will take effect.
By staying informed and taking action now, you can minimise the financial impact and continue managing your fleet with confidence.
If you’re currently looking for a new pick-up, the Ford Ranger Wildtrak and Volkswagen Amarok would qualify and be a smart choice before the changes come in.