Pick up trucks will be subject to a new benefit in kind (BIK) company car tax under rules being introduced on 1 July 2024.
Double cab pick-up trucks currently enjoy a standard rate of company car tax when driven for personal use. As such they have become a popular tax workaround for savvy drivers looking to use them as personal vehicles while paying a minimal amount of company car tax benefit in kind.
Currently any double cab pick-up truck that has a payload of one tonne (1,000kg) or more is accepted as a van for the purposes of paying BIK. With the addition of a hardtop this threshold rises to 1,045kg making any vehicle with a payload greater than this effectively a commercial vehicle like a van. The one tonne threshold has therefore become a must meet requirement for manufacturers to sell in Britain. Consequently, registrations for pick-up trucks have been far higher than in other countries that don’t offer this generous tax break for pick-up trucks and vans.
The official wording is that: “From 1 July 2024, HMRC will no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes. This VAT approach for double cab pickups differentiated based on payload, with anything under one tonne classified as a car, and anything a tonne and over as a van.“
The new ruling makes mention of double cab pick-ups were no longer predominantly used for the carriage of goods, and as such should be treated as cars.
The notice on the gov.uk website goes on to explain that the “classification of double cab pickups will therefore need to be determined by assessing the vehicle as a whole at the point that it is made available to determine whether the vehicle construction has a primary suitability”. In other words has it been designed and purchased as a commercial pick-up or as a car.
Furthermore the statement adds:
“It therefore follows that from 1 July 2024 most if not all double cab pickups will be classified as cars when calculating the benefit charge. This is because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.”
The ruling will come into force in July but there is a way around the new regulations. It says that in a transitional arrangement, those that have purchased, leased, or ordered a double cab pickup before 1 July 2024 will be able to continue with the current BIK rules. However, they will only last for as long as the vehicle is owned or until 5 April 2028.
The Ford Ranger is currently the best-selling pick-up in the UK and is ranked number four amongst all commercial vehicles. The Volkswagen Amarok has recently re-entered the UK market, and is built by Ford. Both pick-up trucks have models that are both over and under one tonne.
Tax for pick-ups is currently charged as a benefit-in-kind at £66 per month for those that are paying 20% BIK rate or at £132 per month at 40% BIK rate. This is the flat rate for 2023/2024 for commercial vehicles.
Company car tax, however, is based on CO2 emissions which will mean that fuel hungry pick-up trucks will likely be stung by a huge tax bill. Your average pick-up truck emits in the region of 250g/km. This places it in the highest possible company car tax band of 37%.
For a pick-up truck costing around £50,000 - the price of a mid-range pick-up with VAT - the BIK at 20% would be more than £3500 and at 40% more than £7000 per year.
The current rate for any commercial vehicle is a flat rate based on a nominal £3600 taxable BIK value which means that 20% taxpayers must pay £60 per month and 40% taxpayers a charge of £120 per month.
Last year in the UK the market for pick-up trucks was just over 41,000 units - a 38.7% increase on 2023 sales. It is not known how many of these were bought as company cars, but given the generous loophole it is likely the future market for new pick-ups could be considerably less.
In an amazing U-turn, HMRC abandons proposed increase to double-cab pick-up BIK tax just one week after announcing the changes above. Due to pressure from farmers and the motor industry, pick-up trucks will no longer be subject to a BIK tax.