HMRC Double Cab Pickup Update: Latest Tax Guidelines for 2025
HMRC is set to introduce new tax rules for double cab pick-ups from 6 April 2025. These changes reclassify these vehicles from commercial to car status for tax purposes, affecting both Benefit-in-Kind (BIK) and capital allowances.
The reclassification follows a 2020 Court of Appeal decision aimed at resolving issues in vehicle categorisation. This change is expected to have a significant impact on businesses and employees, likely leading to higher tax bills and a need to rethink fleet management.
Key Points
- Double cab pick-ups will be treated as cars for BIK and capital allowances starting April 2025.
- Transitional measures apply to vehicles acquired before 6 April 2025.
- The new classification affects vehicles with a payload of one tonne or more.
- BIK costs for affected vehicles will rise considerably.
- The changes align with a Court of Appeal decision on vehicle classification.
HMRC Policy Changes for Double Cab Pickups
In 2024, HMRC’s policy on double cab pickups underwent a notable revision. This adjustment to commercial vehicle taxation sparked significant discussion across industries. Businesses sought clarity on how the new rules would affect their fleets.
February 2024 Announcement
In February 2024, HMRC announced stricter tax rules for double cab pick-ups, the ruling categorised multipurpose vehicles as cars for tax purposes, raising concerns in sectors heavily reliant on these vehicles.
Government Response to Feedback
The announcement prompted widespread concerns about the impact on expense claims for these vehicles. In response, the government temporarily withdrew the updated guidance just seven days later, stating that further review was needed. This rapid turnaround highlighted the challenges in implementing fair commercial vehicle taxation.
| Date | Event | Outcome |
|---|---|---|
| February 2024 | Initial Announcement | Stricter tax rules for double cab pick-ups |
| 7 Days Later | Government Reversal | Withdrawal of updated guidance |
| 6th April 2025 | Policy Implementation | Reclassification of double cab pick-ups |
Changes in Vehicle Classification
Starting in April 2025, HMRC’s updated guidelines will classify double cab pick-ups with a payload of one tonne or more as cars. This marks a departure from the current approach, where these vehicles are treated as commercial vans.
Current Tax Rules
Currently, double cab pick-ups with a one-tonne payload benefit from favourable tax treatment. This has made them a preferred choice for businesses seeking efficient tax options. The existing fixed BIK rate for vans is approximately £3,960 annually.
Impact on BIK and Capital Allowances
The new classification will increase BIK tax for these vehicles. For instance, a £48,000 double cab pick-up with CO2 emissions over 170g/km could fall into the 37% BIK bracket. A 40% taxpayer might face an additional annual tax bill exceeding £7,000, a steep rise from current rates.
Capital allowances will also be affected. Businesses will need to treat these vehicles as cars for corporation tax purposes, potentially reducing the available tax relief.
VAT Considerations
While specific guidance is pending, the reclassification could limit VAT recovery, further increasing costs for businesses.
| Aspect | Current Treatment | New Treatment (From April 2025) |
|---|---|---|
| Classification | Commercial Vehicle | Car |
| BIK Rate | Fixed (£3,960 annually) | Up to 37% of list price |
| Capital Allowances | Favourable | Reduced |
| VAT Recovery | Full | Potentially Limited |
Preparing for Upcoming Changes
From 6 April 2025, HMRC’s reclassification of double cab pick-ups will alter how these vehicles are taxed and treated. Transitional measures will allow businesses that have already invested in these vehicles to maintain the current tax treatment until disposal, lease expiry, or 5 April 2029, whichever comes first.
Future Considerations
Businesses might need to reassess their fleet choices, potentially switching to traditional vans or electric vehicles to benefit from more advantageous tax rates. Despite the changes, double cab pick-ups will continue to be classified as light goods vehicles for Vehicle Excise Duty purposes.
Summary
HMRC’s decision to classify double cab pick-ups as cars for tax purposes from April 2025 represents a major change, increasing tax costs for businesses and employees. Employers may face additional expenses, including higher National Insurance contributions for employees who use these vehicles privately.
Businesses should review their vehicle policies and consult tax advisors to understand the full impact of these changes and explore more cost-effective options. While transitional arrangements provide some breathing room, proactive planning will be essential to manage the financial implications of the new rules.
