Double Cab Pick Up Trucks: Changing Tax Treatment

​Significant tax changes concerning Double Cab Pick-Up (DCPUs) vehicles are taking place from April 2025, impacting all businesses that use these vehicles. Understanding these changes is crucial for effective financial planning and compliance.​

Current Tax Treatment of DCPUs

Prior to April 2025, DCPUs with a payload of one tonne or more are classified as vans for tax purposes. This classification offers businesses and employees certain advantages:​

• Benefit-in-Kind (BIK) Tax: Employees using these vehicles for personal purposes are subject to a fixed, lower BIK rate. For instance, the BIK rate for such a van is £3,960, resulting in a tax liability of £792 for a 20% taxpayer. ​

• Capital Allowances: Businesses can claim 100% of the vehicle's cost as a capital allowance in the year of purchase, enhancing cash flow. ​

The Impact of Changes Effective April 2025

Starting from 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, the tax treatment of DCPUs will change:​

• Reclassification as Cars: DCPUs will be treated as cars rather than vans for tax purposes. This shift affects BIK calculations, capital allowances, and deductions from business profits. ​

• Impact on BIK Tax: The BIK will be based on the vehicle's list price and CO₂ emissions. For example, a vehicle like the Isuzu D-Max, with CO₂ emissions around 220g/km and a list price of £37,500, would attract a BIK rate of 37%, leading to a significantly higher tax liability. ​

• Capital Allowances: The ability to claim the full cost of the vehicle in the first year will be removed. Instead, deductions will be spread over several years, affecting cash flow. ​

Transitional Arrangements

To ease the transition:​

• Existing Vehicles: DCPUs purchased, leased, or ordered before 6 April 2025 will retain their current tax treatment until the earlier of disposal, lease expiry, or 5 April 2029.

• New Expenditures: For capital allowances and business deductions, the new rules apply to expenditures incurred on or after 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax. However, expenditures due to contracts entered into before these dates will follow the current rules until 1 October 2025. ​

Recommendations for Businesses

Given these impending changes:

1. Consider Early Acquisition: If planning to acquire a DCPU, doing so before April 2025 allows businesses to benefit from the current tax advantages during the transitional period.​

2. Evaluate Vehicle Usage: Assess whether DCPUs remain the most tax-efficient option for your operations in light of the new rules.​

3. Consult with DNM: Engage with us to understand the specific implications for your business and explore alternative vehicle options if necessary.​

As always with tax, staying informed and proactive will help mitigate the financial impact of tax changes on your business.

Should you have any queries on how the above impacts your business, phone Will on 01803 906 836.