Vans, pick-ups and tax following the 2024 Budget

Earlier in 2024, HMRC announced they would classify double cab pick-up trucks (DCPUs) as ‘cars’ for employment benefit and capital allowance purposes, but then made a dramatic U-turn.

Following a Court of Appeal decision, they have now flip-flopped once again.

In the detailed backup to the 2024 Autumn Budget, from April 2025 most DCPUs will now be classified as ‘cars’ for certain tax purposes.

This means some business owners with large fleets of vehicles will now face huge increases in their tax liabilities. When the change was initially proposed HMRC received major pushback from the farming and motoring industry. They quickly back-pedalled but, in reality, only delayed their plans and revealed them within the flurry of tax rises announced by Rachel Reeves.

Up until April 2025 DCPUs will qualify as ‘vans’ within the context of the benefit-in-kind (BiK) and capital allowances (CAs) rules. The changes announced, and to take effect from April 2025, will be as follows:

Employment benefits

When calculating the taxable benefit on employer-provided vehicles, the amount charged to income tax and employer’s National Insurance depends on whether the vehicle in question is classified as a van or a car. Until 5 April 2025 the rules say that any DCPU with a gross payload capacity of 1,000kg or more is classified as a van.

After 5 April 2025 however, the gross payload capacity criteria will be removed. Classification of DCPUs will be determined solely by assessing the vehicle as a whole and determining whether the vehicle construction itself has a primary suitability to convey goods. As a DCPU is a multi-purpose vehicle, equally suitable for carrying goods and passengers, they will no longer meet the criteria to be considered a van, and therefore are expected to be classified as cars when calculating the benefit charge from April 2025.

The taxable benefit of a car is calculated using the list price when new and a multiplier based on its level of carbon dioxide emissions. Any private use of a company car, no matter how insignificant, will trigger a taxable BiK.

DCPUs typically have high carbon dioxide emissions and so the annual BiK charge from 6 April 2025 can be as high as 37% of the car’s list price. This will result in a significant increase in the taxable BiK compared to the previous flat rate of £3,960 for the year ended 5 April 2025, with no taxable benefit arising at all for insignificant private use of a van.

Transitional BiK arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6‌‌‌ April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5‌‌‌ April‌‌‌ 2029.

Capital allowances

For business owners using vans in their business, there are generous capital allowances available. Vans will usually attract 100% Annual Investment Allowance, resulting in a full deduction from profits in the tax year the van is purchased. The deduction can be particularly helpful for cashflow purposes, given payment of the van will usually be spread over several years.

From 1 April 2025 (for Corporation Tax purposes and 6th April 2025 for Income Tax) DCPUs will instead only benefit from the capital allowances available on cars. These are less generous and spread over several years, attracting lower rates of relief (with the exception of zero emission vehicles).

If you need any further information or advice on employment benefits for your business, please contact Chantelle Martinez: chantelle.martinez@ct.me.

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