Double Cab Pickups: Major Tax Changes from April 2025
The government has confirmed that from April 2025, most double cab pickups (DCPUs) will be classified as cars for tax purposes, reversing the long-standing approach that treated most DCPUs as vans for employment benefits, capital allowances, and business deductions.
This change follows a previous U-turn in February 2024 after industry backlash, only for the government to reinstate the proposal in the Autumn Budget 2024. With businesses in construction, farming, and logistics heavily relying on these vehicles, the impact could be significant, leading to higher Benefit-in-Kind (BIK) charges for employees and reduced tax relief for businesses.
In this article, we break down the key changes, the impact on businesses, and what you should do before the changes come into effect.
Contents
- What’s Changing from April 2025?
- Why Is HMRC Changing the Rules?
- Impact on Benefit-in-Kind (BIK) Calculations
- Impact on Capital Allowances
- VAT Treatment – What’s Staying the Same?
- Transitional Rules – Can You Still Benefit?
- Next Steps for Businesses
- Final Thoughts
What’s Changing from April 2025?
From 1 April 2025 (Corporation Tax) and 6 April 2025 (Income Tax), most DCPUs will no longer be classified as vans. Instead, they will be treated as cars for a variety of tax purposes, meaning:
- Higher taxable BIKs - taxable vehicle benefits for employees using company pickups will likely increase under the new rules, depending on vehicle specifications.
- Reduced capital allowances – most businesses will no longer be able to claim either the Annual Investment Allowance (AIA) or Full Expensing (FE) on the vehicle, instead applying the lower annual writing down allowances.
- Stricter tax deductions – businesses will no longer be able to deduct the full cost of certain expenses relating to a pickup (e.g. allowable hire payments).
The key exception to the proposed changes is that VAT treatment will remain unchanged (see further below).
Why Is HMRC Changing the Rules?
Historically, DCPUs were classified as vans for tax purposes based on the payload test—vehicles with a payload of one tonne or more were determined to be ‘primarily suited to the conveyance of goods or burden’ and not classified as cars.
However, in Payne and Ors (Coca-Cola) v R and C Commrs (2020), the Court of Appeal ruled that a vehicle’s primary suitability must be assessed as a whole rather than relying on narrow technical specifications like payload.
The ruling established that if a vehicle is equally suited for carrying goods and passengers, it should be classified as a car. This decision directly contradicts HMRC’s previous payload-based approach, leading to the new rules from April 2025.
Impact on Benefit-in-Kind (BIK) Calculations
Before April 2025:
- DCPUs classified as vans attract a flat-rate van benefit charge (£3,960 for 2024/25).
- In most cases, this is significantly lower than the BIK charge for cars, which is based on list price and CO₂ emissions.
- Employers covering private fuel costs for van drivers are subject to a flat-rate van fuel benefit charge (£757 for 2024/25).
After April 2025:
- Most DCPUs will be classified as cars, meaning employees and employers could pay thousands more in income tax and Class 1A NICs each year.
- Fuel benefit charges will also likely increase, as the car fuel benefit is based on a higher multiplier (£27,800 for 2024/25) and car BIK percentage, rather than the flat-rate van fuel charge (£757).
- In addition, DCPUs used solely for business and ordinary commuting purposes may have previously been exempt from the van (or van fuel) benefit charge due to the ‘restricted private use condition’. However, under the new rules, these vehicles will now be subject to car (and car fuel) benefit charges, even where private use is limited to ordinary commuting.
Example:
A double cab pickup with a £40,000 list price and 150g/km CO₂ emissions could attract a BIK charge of over £14,000 per year—substantially higher than the current £3,960 van rate.
If private fuel is also provided by the employer, the fuel benefit charge could result in an additional taxable benefit of over £10,000 per year—compared with the current £757 van rate.
As shown in the example, the proposed changes will significantly increase taxable benefits, leading to higher tax liabilities for employees using DCPUs as company vehicles and higher Class 1A NIC costs for employers.
Impact on Capital Allowances
Before April 2025:
- DCPUs classified as vans generally qualify for 100% Annual Investment Allowance (AIA) or Full Expensing (FE), meaning businesses can deduct the full cost of the vehicle in the year of purchase.
After April 2025:
-
Most DCPUs will be treated as cars, meaning businesses can only claim pro-rated annual Writing Down Allowances (WDAs):
- Main rate: 18% per year on a reducing balance basis
- Special rate: 6% per year on a reducing balance basis (for higher-emission vehicles)
VAT Treatment – What’s Staying the Same?
The good news is that the VAT treatment of DCPUs remains unchanged. Despite the shift in classification for BIKs, capital allowances and business deductions, DCPUs with a payload of one tonne or more will still qualify as commercial vehicles for VAT purposes.
This means that businesses can continue to reclaim input VAT incurred on these vehicles, subject to normal VAT rules. However, while VAT relief remains available, the overall tax efficiency of DCPUs compared to traditional vans should be carefully considered, particularly given the increased BIK charges and reduced capital allowances from April 2025.
Transitional Rules – Can You Still Benefit?
To ease the transition to the new tax rules, temporary relief measures will apply to DCPUs purchased, leased, or ordered before April 2025. These transitional arrangements allow businesses to continue applying the current tax treatment under specific conditions:
Employment Income (Benefit-in-Kind)
Employers who purchase, lease, or order a DCPU before 6 April 2025 can continue applying the existing van classification until the earlier of:
- The vehicle disposal date
- The lease expiry date
- 5 April 2029
Capital Allowances
For expenditure incurred on a DCPU as a result of a contract signed before 1 April 2025 (Corporation Tax) or 6 April 2025 (Income Tax), businesses can continue to apply the existing capital allowances rules if the expenditure is incurred on or after these dates but before 1 October 2025.
Business Deductions (Lease Costs)
If a hire agreement for a DCPU with a payload of one tonne or more is entered into before 1 April 2025 (Corporation Tax) or 6 April 2025 (Income Tax), and the expenditure occurs on or after these dates but before 1 October 2025, it will continue to be treated under the current rules—meaning it will not be classified as car hire and subject to the high-emissions lease rental restriction.
However, any expenditure incurred on or after 1 October 2025 will be treated as car hire costs, regardless of when the contract was signed.
These transitional provisions provide businesses with up to four years to retain the current tax treatment for existing DCPUs in particular circumstances, helping to mitigate the financial impact of the new rules.
Next Steps for Businesses
To prepare for the proposed changes and navigate the transition effectively:
- Review your current vehicle fleet – Assess whether your existing DCPUs will be impacted by the reclassification and determine if any new purchases or leases should be made before April 2025 to extend the current tax treatment.
- Consider vehicle acquisition timing – If your business relies on DCPUs, evaluate whether purchasing or leasing before April 2025 could help you benefit from the transitional rules, potentially saving on BIK charges, capital allowances, and hire cost deductions.
- Assess tax implications for employees – Employees who use company DCPUs for work may face higher personal tax liabilities due to increased BIK charges. Employers should communicate these changes early and consider whether alternative vehicle options would be more tax-efficient.
- Review business cost impact – With reduced capital allowances and higher employer NIC costs, businesses should assess the financial implications and explore potential adjustments to vehicle policies or alternative fleet options.
- Stay informed and seek advice – As HMRC provides further clarifications and updates, staying up to date is crucial. Seeking specialist tax advice can help ensure your business makes informed decisions in light of these changes.
Taking proactive steps now can help minimise costs and ensure a smoother transition to the new tax treatment of DCPUs from April 2025.
Final Thoughts
The April 2025 reclassification of DCPUs marks a major shift in the taxation of business vehicles. While the VAT treatment remains unchanged, higher BIK charges, reduced capital allowances, and stricter deductions could increase tax liabilities for both businesses and employees.
With these changes set to take effect soon, businesses must carefully evaluate their vehicle policies, tax planning strategies, and employee benefits to avoid unexpected costs. Understanding the transitional rules and taking action before the changes come into effect can provide valuable tax savings and help ensure a smoother transition under the new regime.
Get in Touch
For more information on how these changes impact your business, contact us today to arrange a free initial consultation.
This article provides general information and should not be considered professional advice. It reflects legislation and practices at the time of writing, which may change. Individual circumstances vary, so please consult us before taking any action. We accept no responsibility for financial loss arising from actions taken without our written advice.
Liam O'Riordan
As Principal at Veritas ATS, I help start-ups, owner-managed businesses, and individuals simplify accounting and tax, providing clear, practical solutions tailored to their needs.
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