The UK Government's recent Autumn Budget introduced significant tax changes for pickup trucks, particularly double-cab models with a payload of 1 ton or more. These adjustments will take effect in April 2025 and are expected to impact businesses and employees who use these vehicles. Here's a breakdown of the changes and their implications:
Key Changes
Reclassification for Tax Purposes:
From April 2025, double-cab pickup trucks will be treated as cars, not commercial vehicles, for income tax, corporation tax, and other related purposes.
This change affects the way capital allowances, benefits-in-kind (BIK), and deductions from business profits are calculated.
Capital Allowances:
For vehicles purchased before April 2025, the current rules still apply, allowing businesses to benefit from 100% tax deductions in the first year under the Annual Investment Allowance or full expensing (for new vehicles).
Post-April 2025, vehicles will fall under car rules, typically offering slower depreciation rates for tax purposes.
Benefits-in-Kind (BIK):
Employers can use transitional BIK arrangements for vehicles ordered, purchased, or leased before April 6, 2025. These arrangements last until the vehicle is sold, the lease ends, or April 2029, whichever comes first.
Reason for the Changes
The reclassification follows a 2020 court ruling involving Coca-Cola, where certain pickup trucks were deemed more akin to cars than vans due to design and use. The government initially adopted this change in 2024 but reversed it shortly after due to political pressure. The current Labour government reinstated the reclassification in the 2024 Autumn Budget.
Implications for Businesses
Increased Costs: The reclassification as cars means higher benefit-in-kind taxes for employees using these vehicles for personal use.
Planning Opportunities: Businesses have until April 2025 to purchase or lease vehicles under the old rules, potentially saving on taxes.
Administrative Adjustments: Employers will need to review vehicle fleets and update tax reporting and employee policies accordingly.
Next Steps for Businesses
Evaluate current and planned vehicle purchases before the April 2025 deadline.
Consult with tax advisors to understand how the new rules affect company expenses and employee benefits.
These changes aim to streamline vehicle tax classifications but may increase tax burdens for businesses relying on double-cab pickups. Proper planning and consultation are essential to mitigate the impact.