UK tax changes: Double cab pickup trucks to be classified as cars from April 2025

On 12 February 2024, HM Revenue & Customs (HMRC) announced new guidance on how double cab pickup trucks were to be classified, resulting in most vehicles being classified as a car rather than a van. The changes were due to take affect from 1 July 2024.

However, on 19 February 2024, HMRC announced a U-turn and scrapped the proposed changes following backlash from manufacturers, business owners and individuals alike

During the 2024 Autumn budget, HMRC announced that they have now gone full circle and are set to treat double cab pickup trucks as cars from April 2025, resulting in increased tax liabilities for employers and their employees.

What is a Double Cab Pick Up (DCPU)?

According to HMRC a DCPU is a vehicle which has:

• a row of seats behind the driver and is capable of seating in the region of four passengers in addition to the driver 

• four doors which can be opened independently; and 

• an uncovered pickup area behind the passenger cab

What is the current position?

Currently, HMRC defines a car or a van in line with the definitions used for VAT purposes. This has historically been based on the payload of the vehicle, with any DCPU with a payload under one tonne classified as a car and any vehicle with a payload of one tonne of more classified as a van.

It has been extremely beneficial for employers and employees for a DCPU to be classified as a van enjoying the far lower cash equivalent benefit in kind (BIK). This results in substantial tax savings for the employees and Class 1A National Insurance Contributions (NIC) and Capital Allowances savings for the employer.

What has prompted HMRC to make changes to the treatment of DCPUs?

In 2020, the Court of Appeal ruled on a long standing case involving crew-cab vehicles used by Coca Cola. The crew-cab vans had a covered area in the rear which they used to carry their load, but they also had a second row of seats behind the driver to transport passengers

Coca Cola argued that these vehicles were vans; however, the Court of Appeal ultimately ruled that they should be treated as cars because of the second row of seats, which they stated meant the vehicles’ primary purpose was no longer the carriage of goods

Following this ruling, there has been an inconsistency in the tax treatment of DCPUs and crew-cabs. Both vehicles could be argued to have a mixed usage, however the crew cabs were ruled to be treated as cars whilst the DCPUs continued to benefit from being treated as vans.

What are the changes to be implemented from 6 April 2025?

From 1 April 2025 (for Corporation Tax purposes) and 6 April 2025 (for Income Tax purposes), HMRC have confirmed that following the Court of Appeal judgement, the one tonne payload test will no longer be applied to DCPUs (except for VAT purposes). Instead, it will be down to the employer to ascertain whether the vehicle is “primarily suited to the conveyance of goods”. If there is a dual purpose, or the vehicle is primary suited for the conveyance of passengers then it will be treated as a car.

How much extra will I have to pay as a result of these changes?

A van BIK for 2025/26 is currently set at £4,020, and if fuel is made available for private use, then an additional BIK of £769 will arise. These relatively low BIKs compare favourably to the tax treatment of a company car whereby the BIKs are based on the list price and the CO2 emissions figure of the vehicle, with the lower the CO2 emissions figure the lower the percentage applied by HMRC to the list price of the vehicle to generate the taxable BIK.

If, for example, we look at a pick-up truck with a list price of £50,000 and CO2 emissions of over 170g/km, putting it into the highest company car BIK bracket of 37%. This would result in a BIK for a full tax year of £18,500 and a potential fuel charge of £10,434 (£28,200 as set by HMRC x 37%). Below we look at the potential impact on a higher rate taxpayer and for the company.

Will the Capital Allowances treatment of DCPUs change?

The existing Capital Allowances treatment will apply to those who purchase DCPUs before April 2025 with any DCPUs purchased after April likely to follow the same treatment as company cars. Given DCPUs tend to have CO2 emissions in excess of 50g/km this is likely to mean capital allowances available at a rate of just 6% when compared to up to 100% under the existing treatment as vans via the Annual Investment Allowance. 

Will there be a period of transition from the current treatment to the new rules?

Yes, transitional arrangements are in place so that employees and employers are not subject to these higher tax rates on vehicles that they already own or have on order. The transitional arrangements provide that where employers have purchased, leased or ordered a DCPU before 5 April 2025 then the previous tax treatment will continue until the earlier of the vehicle being disposed, the lease expiring or 5 April 2029.

What should I do?

Whilst the transitional rules will delay any decision on future company vehicles for some, many will need to start considering their options shortly, considering both the financial implications and the needs of the company and the individuals concerned.

These rule changes may force employers and employees to consider whether a pick-up truck should be replaced with a conventional van, or whether other options, such as electric and hybrid cars, could be more appropriate given that they currently still benefit from various tax incentives and low BIK rates. 

If you need any further guidance on this topic, please do not hesitate to get in touch with a member of our team.