HMRC announces new tax implications for double cab pickups

As part of the UK Government's 2024 Autumn Budget, HMRC has announced a significant change in the tax classification of double cab pickups (DCPUs), with a new policy that will see DCPUs purchased from 6th April 2025 onwards treated as cars rather than commercial vehicles for tax purposes. This change, designed to close a perceived tax loophole, is expected to impact both businesses and individuals who rely on double cab pickups for work and commuting. Below, we break down what this means for DCPU owners, who will be affected, and what the practical implications are for tax planning.

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What is a double cab pickup?

Double cab pickups, commonly known as DCPUs, are versatile vehicles featuring two rows of seats and four doors, allowing them to carry multiple passengers while providing a spacious loading area at the back. Popular models, such as the Ford Ranger, Toyota Hilux, and Mitsubishi L200, offer a combination of comfort, passenger space, and load capacity. This blend of utility and passenger comfort has made DCPUs an ideal choice for both business use and personal commuting, especially in industries like construction, agriculture, and logistics.

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Historic tax treatment of double cab pickups

For years, DCPUs have enjoyed favourable tax treatment, as they’ve been classified as commercial vehicles (vans) rather than cars. This classification has offered benefits like lower Benefit-in-Kind (BIK) tax rates for employees using them for work, as well as advantageous write-down allowances for businesses purchasing them.

However, as of the 2024 Labour Government Autumn Budget, HMRC has announced that this advantage will change, which has come after a previous attempt to classify DCPUs as cars, under the Conservative government in February 2024 to be effective from July 2024 but was reversed within a week due to industry concerns. Despite that U-turn, HMRC has now reintroduced the measure, citing a need for clarity and consistency in vehicle tax classifications.

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HMRC reclassification of double cab pickups as cars

HMRC's decision to reclassify DCPUs as cars for tax purposes stems from a desire to bring the tax treatment of these vehicles in line with their mixed business and personal use. While they are technically commercial vehicles, many DCPUs are frequently used as both work and private vehicles due to their high passenger capacity and comfort. By categorising them as cars, the government aims to ensure that owners using these vehicles primarily for personal purposes pay similar tax rates to those driving traditional cars.

The reclassification will take effect from 6th April 2025, after which any new double cab pickups purchased will be subject to car tax rules rather than van tax rules. This change will notably impact company car drivers, who will face higher Benefit-in-Kind (BIK) rates, and businesses, which will see adjustments to Capital Allowances on these vehicles.

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How does the new double cab pickups policy affect business tax?

The new policy will likely impact businesses of various sizes that have relied on double cab pickups as a tax-efficient option for employee vehicles. Currently, businesses enjoy more lenient tax rules for vans, such as a flat-rate BIK for private use, but the reclassification to car status will introduce more complex (and often higher) BIK tax rates. This shift means companies will need to consider alternative tax-efficient vehicles for their fleet or assess whether the increased tax on DCPUs is justifiable for their operational needs.

For businesses purchasing DCPUs after April 2025, the change will also mean less generous Capital Allowances, which could increase the long-term cost of maintaining a fleet. This could lead to a reshuffle in vehicle policy for companies looking to reduce their tax liabilities. Companies affected may want to review their fleet strategy to determine whether investing in electric vans or other eco-friendly options might offer better tax incentives going forward.

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Implications of new DCPU tax rules for employees and self-employed individuals

For employees using a company-provided DCPU, the reclassification will lead to higher tax bills due to the shift to car BIK rates, which are generally higher than the van BIK rates. The added tax burden may lead some employees to reconsider DCPUs as a viable option, especially if their use of the vehicle is primarily personal.

Self-employed individuals who use DCPUs for work and personal needs will also see the tax treatment shift. Under current van tax rules, the use of DCPUs can offer more straightforward tax benefits. But from April 2025, self-employed individuals will be taxed at car rates, which could mean more paperwork and potentially higher tax contributions if the vehicle is used privately as well.

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Tax planning for new double cab pickups rules: what next?

If your business or personal tax planning involves the use of double cab pickups, it’s worth revisiting your strategy well ahead of the 2025 change. You may want to consider the following:

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• Evaluate fleet options: If your business relies on DCPUs, consider whether you might switch to vehicles with more favourable tax treatment, such as electric vans or fully commercial vehicles.
• Plan purchases carefully: Since the new rule only applies to DCPUs purchased after April 2025, businesses and individuals planning to buy a DCPU may want to consider doing so before this date to take advantage of current tax rules.
• Review your tax strategy: Speak to your tax advisor to understand the broader impact this could have on your tax liabilities. Adjusting your approach now could help you avoid a larger tax bill in the future.

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Transitional arrangements for employers that have already purchased a DCPU

To ease the shift to the new tax rules, HMRC has introduced transitional arrangements for employers who have already purchased, leased, or ordered a double cab pickup before 6th April 2025. Under these arrangements, businesses can continue to apply the current (pre-2025) tax treatment on eligible vehicles until the earlier of the vehicle’s disposal, lease expiry, or 5th April 2029. This means that, for a period, companies with existing DCPUs will not face the new tax implications as long as they meet the criteria. For reference, the pre-2025 treatment is outlined in HMRC’s Employment Income Manual at EIM23150.

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Below are examples illustrating how these transitional rules apply to DCPUs made available to employees, specifically those vehicles not primarily designed for carrying goods:

• Example 1 – Employer A purchased a double cab pickup on 14th September 2025. Because the purchase occurred after 6th April 2025, the new rules apply, and this vehicle will be classified as a car, triggering a car benefit charge.
• Example 2 – Employer B leased a double cab pickup on 10th December 2024. As this lease was initiated before 6th April 2025, the previous tax treatment applies until the lease ends or until 5th April 2029, whichever comes first.
• Example 3 – Employer C initially purchased a double cab pickup on 10th January 2024, which was later traded in for a new model on 10th April 2025. The first vehicle remains under the old rules until the trade-in date. However, the replacement DCPU, acquired after 6th April 2025, is subject to the new classification as a car, resulting in a car benefit charge.
• Example 4 – Employer D placed an order for a double cab pickup on 5th January 2025, although the vehicle was not received until 2nd September 2025. Since the order was confirmed before 6th April 2025, the previous rules apply until the earlier of - disposal, lease expiry, or 5th April 2029.

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These transitional rules are intended to give employers sufficient time to adapt to the new tax treatment, especially for vehicles already in service or in the procurement pipeline prior to the 2025 deadline.

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LWA are here to help you

This change is one of several aimed at modernising the UK tax system and reducing discrepancies between vehicle classes, but it does have potential cost implications for businesses and individuals using double cab pickups. For more guidance on how this change might affect your tax strategy, feel free to contact the corporate and personal tax team at LWA. You can get in touch with our Manchester office on 0161 905 1801 or our Warrington team on 01925 830 830, or email us at [email protected].