Upcoming double cab pickup change will lead to significant tax hike
It was confirmed in last October’s Autumn Budget that double cab pickups (DCPU) would be treated as cars, not vans, for benefit in kind (BIK) taxation purposes from 6 April 2025.
This change was initially proposed by the previous Government back in February 2024 and due to take effect from July 2024. However, that announcement was quickly reversed on the back of negative reception and industry backlash, and so was shelved. The Labour Government has now decided to proceed with that change from this April.
One of the driving factors behind the change is that HMRC has always had difficulties from a tax perspective with DCPU as they fall right between the middle of the definition of a car (a vehicle primarily used for the carriage of passengers) and the definition of a van (a vehicle primarily suited for carrying goods rather than passengers). This rule change will formally bring company double cabs in line with the tax rates for company cars, as many are often used for a mix of commercial and personal reasons.
Differences between BIK charges for cars and vans
The current company van tax treatment for DCPU is very advantageous due to the fact that they incur low flat annual scale charges – currently £3,960 for the van and £757 if any private fuel is provided. This is very different from the more punitive CO2 emissions sliding scale charges that are applied for company cars. The table below shows the difference between the BIK charges of a DCPU in 2024/25 and 2025/26 (when they will be treated as cars).
P11D benefit | Extra Tax and Class 1A NIC | |||||
24/25 | 25/26 | Increase | Tax at 40% | NIC at 15% | Total | |
Vehicle BIK | £3,960 | £11,840 | £7,880 | £3,152 | £1,182 | £4,334 |
Fuel BIK | £757 | £10,434 | £9,677 | £3,871 | £1,452 | £5,322 |
£9,656 |
Model used: Nissan Navara – CO2 169g/km (37% BIK)/List Price £32k
Transitional arrangements
It’s important to point out that there are transitional rules to avoid a “cliff edge” situation for businesses and DCPU drivers. Any double cab vehicles already being used prior to the 6 April change will continue to benefit from van treatment until the earlier of:
- Disposal or lease expiry
- 5 April 2029
What can you do?
If you have a DCPU lease which is due to expire in the next year or two, it may be beneficial to enquire into handing the vehicle back and arranging a new DCPU lease pre-6 April, as this would extend the period of van treatment under the above transition rules.
In the same way, if you are planning on introducing new DCPU into your vehicle fleet, it may be advantageous to finalise the agreement prior to the start of the 2025/26 tax year.
The tax treatment is based on the date any lease agreement is entered into, not the date you take delivery of the vehicle. As an example, if a four-year lease agreement is entered into in February 2025, but the vehicle isn’t delivered until September 2025, that lease will be viewed as beginning in February, meaning you have four years from that date until the new rules take effect.
An alternative solution could be to consider the electric vehicle options available as they may be a more tax efficient way of providing company vans (and cars) going forward.
Corporation Tax impacts
HMRC also published their plans to change the capital allowance treatment of DCPUs from 6 April 2025 to align with this new BIK treatment, meaning they will be treated as cars not vans for capital allowance purposes as well.
An effect of this is that cars are only eligible for limited Writing Down Allowances instead of tax reliefs such as Annual Investment Allowances or Full Expensing.
We are here to help
If you have any questions relating to the forthcoming changes to the tax rules for DCPU, please speak to our tax specialist team via the form below or get in touch with your usual Azets advisor.