New tax rules for double cab pick-ups

Under tax reforms effective April 2025, double cab pick-up vehicles (DCPUs) with a payload capacity of one tonne or more will be treated as cars for tax purposes. This reclassification impacts corporation tax (from 1 April) and income tax (from 6 April). Key areas affected include capital allowances, Benefit-in-Kind (BIK) taxation, and some business profit deductions.

Benefit-in-Kind Changes:

Previously, DCPUs incurred a flat BIK charge of £3,960, leading to £792 in taxes for basic-rate payers and £1,584 for higher-rate payers. Under the new rules, BIK will instead be calculated as a percentage of the vehicle’s full retail price (including VAT). This percentage is based on the vehicle's CO2 emissions, with high-emission vehicles like most DCPUs falling into the top tax bracket of 37%. Consequently, tax burdens for both employees and employers are expected to rise significantly.

Transitional Arrangements:

A transitional period applies for employers who acquire, lease, or order a DCPU before 6 April 2025. These vehicles will continue to be taxed under the current system until the earlier of the vehicle’s sale, lease expiry, or 5 April 2029. This provides temporary relief for businesses managing existing fleets but limits long-term benefits.

Private vs Business Use:

BIK taxation applies only to vehicles used for private purposes. Employees provided with DCPUs strictly for business use can avoid BIK charges if they can prove no private use. Typically, this would require evidence such as the ownership of a separate personal vehicle for private journeys.

Implications for Employers and Employees:

For businesses, the change increases administrative and financial burdens, including higher employer National Insurance contributions. Employees face larger personal tax bills due to the retail price and emissions-based BIK structure. Businesses are encouraged to assess fleet strategies, including the timing of acquisitions, to optimise tax efficiency before the new rules take effect.

The reclassification underscores the government’s intent to align taxation with environmental goals, encouraging lower-emission vehicle choices for both personal and business use.