Double-cab pick-up truck tax explained: company car tax and VAT

For years, the popularity of the double-cab pick-up truck has been fuelled by favourable tax legislation, possibly more so than any other type of vehicle on the UK car market. In Febuary 2024, HMRC announced that was set to change and that double cab pick-up trucks with payloads of over 1,000kg would no longer be classified as commercial vehicles for Benefit-in-Kind (BIK) company car tax purposes and would instead be classified and taxed as cars. Outcry from pick-up users ensued and within days HMRC had back-tracked, announcing that the commercial vehicle tax classification would remain afterall.   

The appeal of the double cab truck has long been that these five-seat vehicles, often with very well-appointed and car-like interiors, have been classified as commercial vehicles and those using them as company cars have paid the flat commercial vehicle rate of BiK tax. This is in contrast to the company car tax system, which is calculated using the vehicle’s CO2 emissions. 

The current rules state that any double-cab pick-up with a 1,000kg minimum payload will only incurr the flat commercial vehicle rate of company car tax. If the truck has a load bay cover installed the minimum payload to qualify increases to 1,045kg.

The 2024 double-cab pick-up BiK tax changes that weren't

HMRC almost immediately U-turned on new guidance issued in February 2024 that said double-cab pick-ups would be classified as cars for company car tax purposes. A statement on Febuary 19 2024 said that: "The government has listened carefully to views from farmers and the motoring industry on the potential impacts of the change in tax-treatment. The government has acknowledged that the 2020 court decision and resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses, including vital motoring and farming industries." 

The reference to the '2020 court decision' in the statement pertains to HMRC winning an appeal against Coca-Cola in 2020 over the tax classification of five-seat vans. Two Volkswagen Transporter Kombis and a Vauxhall Vivaro crew van run by the company and classed as vans for tax were judged to be being used as cars.

Since then there had been a long-running debate around the tax treatment of vehicles that walk the fine line between van and car. Doubts have circled the tax classification of vans and pick-up trucks with two rows of seating and, following the pandemic, HMRC stepped up its investigations into the issue. The writing was apparently on the wall for double-cabs and in recent years we’ve seen a significant reduction in the number of these models being offered on the UK market. 

Now it seems that double cab pick-ups will retain their BiK company car tax classification as commercial vehicles along with the VAT classification that enables VAT-registered companies to make savings.

How much will you pay in double-cab company car tax?

Double-cab pick-up trucks with payloads of over 1,000kg are taxed as commercial vehicles. That means company car users in the 20 per cent income tax band would pay a flat annual rate of £792 per year in BIK tax and 40 per cent tax payers would pay £1,584.

If the now withdrawn changes announced in February 2024 had come into force, a £30,000 Ford Ranger double-cab would have been taxed as a company car from July 2024 with its CO2 emissions putting it in the top 37 per cent company car tax bracket. That would have meant 20 per cent tax payers paying a tax bill of around £2,100 and 40 per cent tax payers looking at a £4,100 outlay. This increase in costs associated with running double-cab pick-ups would have had a pronounced effect on the market for these vehicles in the UK and the resulting outcry prompted the quick withdrawl of the plan.

Double-cab pick-up tax benefits for employees and employers

Driving or supplying a pick-up truck (as long as it’s one that's classified as an LCV – see above) has tax implications for both employees and employers. The employee benefits are significant in terms of lower BiK company car tax bills, VAT-registered purchasers of pick-ups can reclaim substantial amounts of VAT and companies can often write-off the full purchase cost against tax. 

Company car tax for double-cab pick-up trucks

The biggest benefit for most pick-up drivers – assuming they are an employee and not a company director – is reduced Benefit-in-Kind rates covering personal use of your company vehicle outside work. Double-cab pick-ups are taxed as commercial vehicles with a fixed BIK rate, set at just £3,960 for the 2023/24 tax year.

That means a 20 per cent taxpayer would hand over £792 to HMRC for the privilege of using their company pick-up as personal transport, while a 40 per cent taxpayer will have to cough-up £1,584.

VAT and Capital Allowance benefits on double-cab pick-ups

Pick-up trucks remain classified as commercial vehicles for VAT purposes. All light commercial vehicles (LCVs) – including double-cab pick-ups with payloads over 1,000kg – qualify for VAT reclaims, as long as the business that purchases the vehicles is VAT registered, of course. The amount of VAT that’s reclaimable depends on how much of the vehicle’s mileage is driven for business. If it’s 80 per cent business mileage, then 80 per cent of the VAT can be reclaimed from the taxman.

This is very different to the position with company cars, as they are only eligible for VAT reclaims if they’re used 100 per cent for business. (Unless they’re bought for use as a taxi, driving school, private hire, or other limited exceptions.) Driving to work from home is not considered as business use by HMRC – a driver who commutes would lose a business all the VAT on a company car, but would lose only a percentage of the VAT on a pick-up.

Pick-ups that are purchased by a business are also eligible for writing-off against Capital Allowances much sooner than company cars. LCVs qualify as ‘plant and machinery’, so the purchase cost can usually be written off in the first year, whereas the write-off rate for company cars could be as low as 8 per cent per year.

Check the details with your accountant

As with all aspects of taxation, it is the responsibility of individuals and businesses to understand the rules and regulations and act accordingly. As personal and business circumstances can vary so widely, it’s vital that anyone considering swapping their company car for a pick-up should take professional accounting advice. The overview we’ve provided is for general guidance only.

The story of the UK pick-up truck market

The latest batch of double-cab pick-ups are larger and tougher than they have ever been before, making them ideal workhorses for tradesmen and those professionals who genuinely need off-road capability. Double-cabs aren’t simply more capable and practical than their predecessors, but manufacturers have increasingly loaded high-spec versions of their commercial pick-up trucks with glamorous styling accessories and the type of luxury options you’d expect to find in an executive car. 

Not helped by the looming change to the commercial vehicle company car tax classification, the UK pick-up sector has shrunk markedly in recent years, Popular names like the Mitsubishi L200 and Nissan Navara have departed along with newcomers like the Mercedes X-Class and Fiat Fullback. We still have the likes of the Ford Ranger, Isuzu D-Max, Toyota Hilux and VW Amarok, plus the KGM Musso and the electric Maxus T90 EV, the latter of which could be a good option for those who need a double cab as a company car but want to reduce their tax liability.

With the tax advantages of running a cool-looking double-cab pick-up instead of a traditional family car or SUV set to disappear, the future of the market looks uncertain. Even the best driving 4x4 pick-up will feel unwieldy and unrefined to many drivers thinking of switching from a regular road car, so the appeal of the double-cab pick-up now returns very much in its toughness and off-road ability. 

Now, for a full rundown of the tax rules regarding vans, click here...