Beware increased employment tax on double cab pick-up vehicles

17 January 2025

From April 2025, double cab pick-up vehicles (DCPUs) will generally be treated as cars by HMRC for corporation tax, income tax and National Insurance contributions (NICs) purposes, which may significantly increase the tax cost of such vehicles.

The end of a favourable tax benefit

The benefit in kind value for a van that is available for private use is set at a flat rate (£4,020 for 2025/26), whereas the value of a company car benefit derives from its list price multiplied by an appropriate percentage (up to 37%) based on its CO2 emissions.

Where fuel has been provided for private usage, the related van fuel benefit is also set at a flat rate (£769 for 2025/26), whereas the company car fuel benefit derives from a fixed amount (£28,200 for 2025/26) multiplied by the appropriate percentage based on its CO2 emissions. 

In addition, the van and van fuel benefits do not apply if private use is deemed to be insignificant or the ‘restricted private use’ conditions are met. There is no such easement for company cars.

The revised classification of DCPUs with a payload of one tonne or more as cars will mean that where such vehicles are made available to employees for private use, the employee’s benefit in kind will be greatly increased, along with a sizeable increase in the employer’s NICs payable. 

Transitional rules

The revised classification will not apply to DCPUs that are owned, leased or ordered before 6 April 2025 for employment tax purposes. The old rules will still apply to these DCPUs until the earlier of disposal of the vehicle, lease expiry or 5 April 2029.

As a result, employers may need to operate two sets of rules when calculating and reporting benefits in kind, and it will be important to ensure that appropriate records are maintained. Employees provided with a DCPU under the old rules are likely to be considerably better off than their colleagues who have a DCPU made available for their private use under the new rules.

Considerations for employers

Employers should identify DCPUs made available to employees for private use, and consider the impact of the new rules from 6 April 2025.

Accurate records will need to be maintained so that vehicles covered by the transitional rules can be identified when calculating and reporting benefits in kind.

Impacted employees should be made aware of the effect of the new rules, and employers should ensure there is general awareness of the rules to support decision-making on vehicle fleets.

Fleet policy and planning

If there are plans to introduce new DCPUs into a fleet and/or if lease arrangements for DCPUs are due for renewal, consideration should be given to finalising orders before 6 April 2025. 

Those with fleets that are due to be replaced after 6 April 2025 may wish to consider the provision of vehicles that still qualify as vans where appropriate.

Where DCPUs are provided under the new rules, employers should consider whether it may be beneficial to use the HMRC approved mileage rates to reimburse employees for their qualifying business travel rather than making fuel available for private travel.

For more information, please get in touch with David Williams-Richardson, Ian Jones or your usual RSM contact.