One of the lesser-known but more hard-hitting aspects of the Chancellor’s Autumn Budget is the change to the tax treatment of double cab pickup trucks with a payload of one tonne or more.
From April 6, 2025, for income tax, double cab pickups will be treated as cars for Benefit in Kind purposes. This means these vehicles will no longer benefit from the tax treatment given to light commercial vehicles.
The definition of ‘private travel’
It is important to remember that the taxation of vans only applies when a van is made available for private use. Travel between home and work is the only ‘private’ travel that HMRC will allow. However, and this is a big however, any employer providing a van for business use only must be able to provide documentary proof that the vehicle has NOT been used privately.
HMRC will only allow very minor private travel; the example they quote is one trip to a tip to take an old mattress.
Such documentary proof must be in the form of a detailed manual log of every journey (which is very time-consuming and perhaps impractical for a commercial vehicle), or the vehicle should have a fitted tracker.
The new charges explained
Currently, a van is charged based on a fixed scale charge of £3,960. For a basic rate taxpayer tax at 20%, this equates to £792; for higher rate taxpayers at 40%, it is £1,584.
If fuel is supplied, there is a further fixed scale charge of £757. So, the tax payable on the fixed scale charge at the basic rate is £151.20, and at the higher rate is £302.80.
From 6 April 2025, when the same ‘van’ will be classified as a car for tax purposes, when incidentally any private use will mean the vehicle attracts the full benefit in kind on the employee, the tax payable increases substantially.
Let’s work through an example;
- For a vehicle with a list price of £40,000 and CO2 emissions of more than 170g/km, the benefit in kind will be £17,700.
- For basic rate taxpayers, this would result in tax of £3,550 a year. Higher-rate taxpayers would pay tax of £7,110 a year.
If fuel is supplied for private travel, the benefit in kind is based on the Car Benefit Charge Multiplier of £27,800. For the example we are using, the benefit in kind tax band is 37%. The fuel benefit is 37% of the multiplier, £10,286. Tax at 20% is £2,056.20, tax at 40% is £4,330.40
Increases for employer NIC
The increase in Class 1A NIC for the employer is also substantial, a double whammy on top of the increase in the rate from 13.8% to 15%.
Based on the current fixed scale charge Class 1A payable is as follows;
- Van £3,960 at 15% £594
- Fuel £757 at 15% £113.55
- Total £707.55
With the new regulations which class the vehicle as a car
- Car benefit £17,700 at 15% £2,655
- Fuel benefit £10,286 at 15% £1,542.90
- Total £4,197.90
Time is running out
Transitional arrangements will apply to employers who have purchased, leased, or ordered a double cab pickup before April 6, 2025. So, time is running out to buy or order a double cab truck to escape the large increase in the tax payable by the employee and Class 1A NIC payable by the employer.
The Budget notes state that the old benefit-in-kind rules will still apply until the earlier of either disposal, lease expiry, or April 5, 2029.
The difference in treatment between classing the vehicle as a van and a car is, as you can see, huge for both the employee and employer. Urgent planning is therefore required before the end of the current tax year.
