Tax changes for double cab pick-ups in April
From April, most double cab pick-ups will be treated as cars regarding corporation tax and income tax. Dandan Li outlines the changes and the steps CLA members can take
The tax treatment of double cab pick-ups will change next month, following confirmation in the 2024 autumn budget.
While VAT rules remain unchanged, from 1 April for corporation tax and 6 April for income tax, most double cab pick-ups will be treated as cars rather than vans for the purpose of capital allowances and the benefits in kind (BIK) rules. This change follows court rulings, which found that double cab pick-ups (DCPU) are not vans for tax purposes because they do not have a primary purpose to solely transport goods.
This reclassification will increase the tax burden for businesses and employees using DCPUs for personal and business purposes. Transitional arrangements provide some relief, but employees and businesses should prepare for the financial and administrative implications.
Impact on benefits in kind
The distinction between cars and vans is significant when calculating taxable BIK. While negligible private use of a company van does not trigger a taxable benefit, any private use of a company car results in a taxable benefit. BIK charges for cars are based on CO2 emissions and the vehicle's list price.
The table illustrates the tax differences based on a Ford Ranger with CO2 emissions of 208g/km and a list price of £60,000.
| Van/car BIK | Fuel BIK | Income tax @ 20% | Income tax @ 40% | Employer Class 1 NIC on vans/cars BIK | Employer Class 1 NIC on fuel BIK | |
|---|---|---|---|---|---|---|
| Van | £3,960 | £757 | £943 | £1,887 | £546 | £104 |
| Car | £22,200 | £10,286 | £6,497 | £12,994 | £3,330 | £1,543 |
There will be no fuel benefit charge if the employer correctly records all private travel mileage and use the correct rate (or higher) to work out how much their employees must repay for fuel used for private travel.
Impact on capital allowances
The change in status means that the annual investment allowance is no longer available. Capital allowances rates will be based on CO2 emissions. If CO2 emissions are over 50g/km, then you can only claim a writing down allowance of 6% annually.
Transitional rules
Transitional arrangements will apply to contracts entered into before 1 April 2025 (for corporation tax) and 6 April 2025 (for income tax). Vehicles purchased, leased, or ordered under these contracts will be treated under the pre-2025 rules until the earlier of:
- The vehicle's disposal,
- The lease's expiry, or
- 5 April 2029.
VAT rules
VAT treatment for double cab pick-ups will remain unchanged. Vehicles with a payload exceeding one tonne will continue to be classified as goods vehicles for VAT purposes. This allows businesses to reclaim VAT on purchases, provided the vehicle is used for business purposes.
Practical solutions
As an employer, you might consider having one or more cars or vans that are readily available for business use by several employees. The cars or vans are not allocated to any one employee and are only available for genuine business use – they are usually known as pooled cars and vans. You may also consider alternative vehicles for business use, for example, that are still being treated as vans instead of cars for income tax purposes.