Increased Tax Burden for Certain Drivers: Overhaul by HMRC Could Result in Yearly Tax Hike of up to £7,000 for Some.
Double cab pickup truck owners, get ready to face the consequences as the tax man's hammer comes down following Labour's tax adjustments, effective from April 6th.
Almond-eyed critics warn these modifications will leave numerous drivers in a pinch, as iconic models like the Ford Ranger and Toyota Hilux will now be treated as vehicles for Benefit-in-Kind (BIK) taxation instead of their previous tax-friendly classification.
Under the new regulations, double cab pickups will be subject to taxation based on their CO2 emissions and retail value. Subsequently, they will no longer benefit from the lucrative low fixed BIK rates, causing a potential sting for small business owners who have utilized this tax loophole to justify their vehicle purchases.
In the past, double cab pickups have been a boon for small businesses — ruling the road as the go-to option for contractors, farmers, and tradespeople. The triumvirate of affordability, versatility, and tax advantages has fueled the surge in their popularity over the years. Features such as flatbed trucks that can accommodate unconventional cargo, be it farm equipment or landscaping materials, have only augmented their appeal among the working class.
Yet, this idyllic picture is about to change. The new BIK rates for double cab pickups will gradually escalate, with most vehicles facing tax rates as high as 37%. This marks a drastic change from the previous BIK rates for commercial vehicles, which remained fixed at £3,960 irrespective of emissions or price.
Ford, which produces Europe's most widely-sold pickup, has voiced its disapproval of the changes, branding them a rash and myopic move by the government. The company acknowledges the pickup’s importance to diverse sectors, including agriculture, construction, and small businesses.
Back in the Day
Before April 6th, a double cab pickup with a payload exceeding 1 tonne (1,000 kg) was classified as a commercial vehicle or van, attracting lower BIK Tax and full Capital Allowances. The BIK rate, as per the current policy, was £3,960 for the year 2024/2025. HMRC used these definitions for VAT (as per VAT Notice 700/57) to categorize the vehicle for BIK calculations, capital allowances, and other purposes.
Cheapshot Tax Changes from April 6th 2025
From April 6th, double cab pickup trucks transitioned from being treated as commercial vehicles to cars, with the BIK charges escalating significantly as a result. The new BIK rates are now based on CO2 emissions and the vehicle's list price, similar to how cars are assessed. This shift will inevitably burden business owners with expensive tax bills, with their yearly pickup expenses potentially shooting through the roof.
These governmental changes were first announced in the Autumn Budget of 2024, at which time Rachel Reeves indicated HMRC's intentions to modify the policy on double cab pickup trucks for direct tax purposes. The government claims that HMRC will deem a vehicle as a van if it is primarily designed for the transportation of goods, as this constitutes its predominant suitability.
For instance, an Isuzu D-Max owner earning a basic rate of 20% tax would face a staggering annual BIK tax bill of £2,701 under the new guidelines, significantly increased from the previous yearly charge of £792. Similar accessories, including the Toyota Hilux, will result in fourfold increases in BIK expenses for a 40% taxpayer.
In addition to the financial implications, owners will also lose out on benefits such as claiming the full cost of the vehicle during the year of purchase, a perk previously granted to aid cash flow. These essential vehicle deductions will now be spread across multiple years, potentially straining businesses financially and causing a drag on tax relief.
Under the Hood
Why has the government opted for these reductions? HMRC's opinion was shaped by a 2020 Court of Appeal ruling (Payne & Ors v HMRC) that determined double cab pickup trucks were not primarily designed for business use, contradicting previous assumptions. Subsequent to the ruling, HMRC sought to abolish the fixed BIK policy, which Labour reinforced in the Autumn Budget of 2024.
HMRC has also recently clarified the definition of a double cab pickup, with updated guidance stating that pickups must have four doors, regardless of whether the rear doors are hinged at the front or rear, to be considered as such for Benefit-in-Kind purposes.
Furthermore, a transitional period has been granted until April 5th, 2029, for employers who purchase, lease, or order a double cab pickup before April 6th, 2025. This grace period allows these vehicles to retain their current tax treatment, giving businesses ample time to adjust to the new landscape.
In the wake of the government's tax adjustments, effective from April 6th, 2025, double cab pickups will face increased BIK taxation, regardless of their primary use in industries such as agriculture and construction. Under the new regulations, these vehicles will no longer benefit from the lucrative low fixed BIK rates, potentially causing financial strain for small businesses. For instance, an Isuzu D-Max owner with a 20% tax rate might see an annual BIK tax bill of £2,701, significantly higher than the previous yearly charge of £792. This financial impact, combined with the loss of benefits like claiming the full cost of the vehicle during purchase, may prove burdensome for many business owners. Interestingly, HMRC has specified that for BIK purposes, a double cab pickup must have four doors, regardless of the hinges' location. However, a transitional period until April 5th, 2029, offers some respite for those who purchase, lease, or order a double cab pickup before April 6th, 2025, allowing them to retain their current tax treatment.
