The government has announced major changes to the tax system that will classify double-cab pickup trucks as cars starting in July.
Double cab pickups have grown significantly in popularity in recent years because their dual-purpose nature makes them suitable for personal use as well as business vehicles. Many people also choose them for the tax relief they offer. This is because double cabs with a payload of more than a tonne are considered vans and attract much lower company car tax.
However, HM Revenue & Customs (HMRC) quietly announced in a memo yesterday (12 February) that this will change from 1 July 2024. Definitions used for VAT purposes'.
HMRC will now assess the classification of each of these types of vehicles at an individual level, but has stated that from July 2024 'most if not all double cab pickups will be classified as cars for the purpose of calculating the benefit change'. HMRC says this is because these vehicles are ‘equally suitable’ for both the transport of goods and passengers.
Company vehicle tax is based on benefit in kind (BIK), where BIK is a rate based on CO2 emissions taking into account the list price of the vehicle. We prefer electric and hybrid vehicles with low CO2 emissions.
However, pick-up trucks are currently subject to a flat rate of £3,960 for the 2023/2024 tax year. For a 20% taxpayer, van BIK costs £792 per year or £66 per month. For a 40% taxpayer this would be £1,584 per year or £132 per month.
However, these changes will result in significantly higher company car tax costs for pickups. This is because taxes are generally calculated based on high CO2 emissions. The Ford Ranger, Britain's most popular pick-up truck and the country's fourth best-selling 'van' last year, has CO2 emissions of over 200g/km, putting it in the highest BIK tax bracket of 37%.
From July 2024, drivers using a Ford Ranger Wildtrak 2.0 as a company car will pay £290 per month in tax, or £580 per month for high-income taxpayers, according to Professional Pickup. This means drivers will spend £5,376 more per year in company car tax under these new rules, making it uneconomical to operate dual cab pick-ups and likely reducing demand for these vehicles.
New dual-cab pickups ordered or leased by June 30, 2024 will qualify for the current lower tax rate, even if you don't register them until July. Single cab pickups are not affected by these changes.