Upcoming Tax Changes for Double Cab Pickup Trucks: What Construction Business Owners Need to Know

Starting April 2025, double cab pickup trucks (DCPUs) with a payload of one tonne or more will be reclassified as cars for tax purposes. This change will affect capital allowances, benefits in kind (BIK), and certain business profit deductions.

Impact on Capital Allowances

Currently, businesses can claim 100% of the cost of qualifying vehicles under the Annual Investment Allowance (AIA). After April 2025, DCPUs will no longer qualify for AIA. Instead, businesses can claim capital allowances at a rate of 6% per year on the reducing balance.

Impact on Benefits in Kind (BIK)

Employees using DCPUs for personal use currently face a flat-rate BIK charge. Post-April 2025, these vehicles will be taxed as cars, leading to higher BIK charges based on the vehicle’s list price and CO2 emissions. For example, a £60,000 DCPU with high CO2 emissions could result in a BIK charge of £22,200, leading to a tax liability of £8,880 for a higher-rate taxpayer.

VAT Implications

The VAT treatment of DCPUs remains unchanged. Businesses can continue to reclaim VAT on vehicles with a payload exceeding one tonne, provided they are VAT-registered.

Transitional Arrangements

For vehicles purchased, leased, or ordered before April 2025, the current tax treatment will apply until the earlier of disposal, lease expiry, or 5 April 2029.

Actions needed

• Review Your Fleet: Assess your current DCPU usage and consider the financial impact of the upcoming changes.
• Plan Purchases: If planning to acquire new vehicles, consider doing so before April 2025 to benefit from existing tax treatments.
• Consult a Tax Professional: Seek advice to understand how these changes affect your business, manage cash flow, and develop a tax-efficient strategy.