In February 2024, HMRC announced that double cab pick-up trucks would be treated as cars for tax purposes, and then swiftly U-turned on this decision following industry backlash.
Tucked away in the Autumn Budget 2024 was the statement that from April 2025, double cab pick-ups will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits, starting for vehicles purchased or leased on or after 6 April 2025.
The existing tax treatment will continue to apply to those who acquire double cab pick-ups before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a double cab pick-up before 6 April 2025, with payment made by 1 October 2025. In this case, they will be able to use the previous treatment until the earlier of disposal, lease expiry, or 5 April 2029.
Currently, double cab pick-ups do not give rise to a taxable benefit where private use is insignificant. Under the new classification as a car, a taxable benefit arises where the vehicle is available for any level of private use, even if insignificant. This could lead to a benefit charge of up to 39% of the list price (by 2029/30) of the van when used privately.
Income Tax is payable by the employee or director on the value of the benefit in kind at their marginal rate of income tax. The employer will be liable to pay Class 1 A National Insurance at 15% on the value of the benefit plus the fuel benefit if fuel is provided for private purposes.
Benefits need to be reported on form P11D for the 2024/25 and 2025/26 tax years – from 6 April 2026 benefit reporting will be completed through PAYE. More information will be released on payrolling benefits in due course.
There is no change to the VAT treatment of double cab pick-ups. Provided the pick-up has a payload of 1 tonne or more it is considered to be a goods vehicle for VAT purposes and VAT can be reclaimed according to the normal rules.
Below illustrates the tax and National Insurance costs, comparing the current rules with the new rules, based on:
- Ford Ranger
- Cost £48,000 (inc VAT)
- Incidental private use
- Fuel provided by employer
- Higher rate taxpayer
| Current Treatment | Treatment for Vehicle Under New Rules (2025/26) | |
|---|---|---|
| Value of Car Benefit | Nil | £17,760 |
| Value of Fuel Benefit | Nil | £10,434 |
| Income Tax Payable by Employee | Nil | £11,278 |
| Class 1A NIC Payable by Employer | Nil | £4,229 |
| Total Annual Tax Cost | Nil | £15,507 |
Suggested Action
If you are already considering the purchase of a new double cab pick-up, ensure this is completed prior to April 2025.
Discuss with your usual M+A contact how to deal with existing vehicles under the new regime.
