Tax Treatment of Double Cab Pick-Ups
Double cab pickups………..de ja vu!
The previous government caused a stir with their proposal to change the advantageous tax treatment for double cab pick ups in July 2024 and quickly scraped the policy before it was implemented.
In the Autumn 2024 Budget Labour announced that the change to tax treatment will now be introduced from April 2025.
At present pickups with a payload over 1 tonne are classified as commercial vehicles and businesses can potentially claim 100% tax deductible allowances on the purchase and the VAT is also recoverable. Company employees can also benefit from a reduced benefit in kind (BIK).
Changes from April 2025 mean that pickups will be classified as cars and the tax benefits will be lower.
The amount deductible from trading profits will be restricted to 18% WDA or 6% WDA depending on CO2 emissions (most likely 6%).
In 2024/2025 the flat rate BIK applicable to pickups is £3960 so this would cost a 20% taxpayer £792 in tax. The BIK on cars on the other-hand is calculated based on the list cost of the car and the level of CO2 emissions. A double cab pickup with CO2 emissions of more than 170g/km and a list price of £50,000 would result in a benefit in kind of £18,500 and a tax cost of £3,700 for 20% tax payers and £7,400 for 40% tax payers. The higher benefit will also result in a higher National Insurance cost for the employer, especially with the increased rate to 15%.
It is important to note that the BIK is based on the list price of the vehicle, not necessarily the price paid or value of the vehicle and that the addition of the BIK to annual income may push some taxpayers into a higher tax band. This may also impact on the High Income Benefit Charge.
It has not yet been clarified what the VAT treatment will be.
The previous announcement of the policy attracted a lot of criticism and lobbying which resulted in the U turn. It is likely similar objections will be raised again but it is unlikely that Labour would have re-introduced the policy if they were not willing to stand their ground on the issue.
The current capital allowance treatment will stay in place until April 2025 so taxpayers may wish to change their vehicles before then to maximize the tax relief.
Transitional rules for BIK mean that pickups purchased before April 2025 will benefit from the current treatment until the earlier of disposal, lease expiry or April 2029.
Electric vehicles continue to attract better tax relief than
