HMRC is set to close the loophole in which pick-up trucks, such as the Ford Ranger and Nissan Navara, are used as company vehicles for the benefits of tax, from the 1st of July this year. Currently, double cab trucks are classed as vans, rather than cars, however, this is set to change later this year.
The change will see drivers that use their trucks for personal and work use pay more tax on the vehicles. However, there is some good news, any double-cab pick-up truck that was purchased, leased or ordered before the 1st of July 2024 will not be affected by these changes and single-cab pick-up trucks will not be impacted by the changes at all.
Double-cab pick-up trucks have grown popular in the past years due to their versatility. The trucks have plenty of room to store working equipment whilst having the benefits of nice interiors that make them suitable for personal use.
Not to mention that any truck with a payload of more than a tonne was classed as a van for taxation purposes, offering drivers a noticeable reduction in tax on these vehicles.
However, in a note released by HMRC earlier this week, they stated that they will “no longer interpret the legislation that defines car and van for tax purposes in line with the definitions used for VAT purposes”.
Company vehicle taxes are based on benefit in kind (BIK). This system ranks cars based on their CO2 emissions and their cost price. The higher the CO2 output, the more tax. As you can imagine, this drives people towards using electric or hybrid cars. For more information on the benefits of going electric with your company car, you can read this article.
At the moment, pick-up trucks are charged at a flat rate. For 2023/2024 the cost of using a pick-up truck for both personal and business use is £3,960. For a 20% taxpayer, the BIK is £792 per year, while those who are on the 40% tax bracket would have to pay £1,584 per year.
With the changes coming on July 1st, these payments are set to increase substantially. With the vehicles being classed as cars, instead of vans, they will suffer increased payments due to their high CO2 output.
As an example, the Ford Ranger, an extremely popular pick-up truck in the UK has CO2 emissions of over 200g/KM. This puts the vehicle in the highest possible BIK tax bracket, which currently sits at 37%.
What this means for drivers is that their previous payments of £792 or £1,584 (depending on their tax bracket) could rise to £4,440 per annum for 20% taxpayers and £8,880 per annum for those who pay 40% tax. (Based on a vehicle price of £60,000.)
Our advice is that if you were considering buying or leasing such a vehicle, you do so before the 1 July 2024 deadline. Providing the purchase or lease is made before that date the director or employee will be able to pay benefit-in-kind tax at the lower rate until 5 April 2028 or until the vehicle is disposed of, whichever is earlier.
