Double cab pick ups and electric cars

Historically the tax relief available on both double cab pick-ups and electric cars has made them an attractive option for many businesses, either for use by the owner or as a company vehicle to employees. With effect from April 2025 , changes have been made to both, that make these less beneficial – quite significantly in the case of the double cab pick up.

The government introduced the idea of removing the beneficial tax breaks on double cab pick-ups earlier in 2024 but then made a rapid u turn. In the small print of the Budget in October 2024 however, these were reintroduced to take effect from April 2025.

For clarity, a double cab pick-up is one that has a row of seats behind the driver making it capable of seating four passengers, four doors and an uncovered pick up area behind the passenger cab.

Historically, provided the pick-up was capable of carrying a payload of at least 1 tonne, for income tax and corporation tax purposes, it was treated as commercial and 100% tax relief could be claimed against the cost. In addition, where the vehicle was provided by a company to an employee, the benefit in kind charge was based on the far lower, flat rate for vans rather than on a percentage of the list price of the vehicle. Both of these have now changed, with tax relief available based on car rates and the benefit in kind charges calculated as for cars.

The difference will potentially be significant. For example, a new Toyota Hilux double cab pick-up ranges between £40,000 and £70,000, depending upon the specifications. Under previous tax rules, a £50,000 vehicle could have resulted in a £12,500 saving for a company paying corporation tax at 25%, or £20,000 plus National Insurance for a sole trader taxed at the higher rate of 40%.

Under the new rules, the tax relief for cars with co2 emissions of over 50g/km is just 6% of the purchase price. A £50,000 vehicle falling into this category will now attract allowances in year 1 of just £3,000, saving tax of £750 for a company paying tax at 25% – a reduction of £11,750. For individuals paying higher rate tax, the increase in tax alone could be £18,800.

From April 2025, the van benefit – currently £4,020 for 2025/26 - will continue to apply for vehicles purchased before this date, remaining in place until the earlier of the date the vehicle is sold or April 2029. For an employee paying tax at the basic rate of 20% this will add £804 to their tax bill, increasing to £1,608 for a higher rate taxpayer.

After April 2029, or if the existing pick up is disposed of and replaced with a new one before that date, the charge will be based on the list price of the vehicle and the CO2 emissions. For example, a £50,000 pick-up with CO2emissions of 250g/km, would be taxed at 37% of the list price, resulting in:

• A benefit of £18,500,
• A tax charge of £3,700 for a basic rate taxpayer,
• A £7,400 charge for a higher rate taxpayer.

Additionally, the employer would face an increased Class 1A National Insurance liability of £2,775 – up from £603.

Looking ahead, single cab pick-ups may become more popular – particularly where vehicles are provided by a company to an employee. Business owners will need to watch they don’t get caught out by the new rules by retaining vehicles beyond April 2029.

Changes are also being made to the tax treatment of electric cars provided to employees. Depending upon the co2 emissions and the electric range, the benefit in kind charges are set to increase by 1% per year until 2029-30.

Currently, a vehicle emitting 50g/km of CO2 or less with an electric range over 130 miles is subject to a 3% charge of the list price, rising to 7% by 2029/30. However, for vehicles with the same emissions but an electric range under 30 miles, the charge will increase to 19% by 2029/30.

For tax relief purposes:

• New and unused electric vehicles or those with 0g/km CO2 emissions qualify for 100% tax deduction.
• Second-hand vehicles or those emitting 50g/km or less are eligible for an 18% deduction.
• Vehicles exceeding 50g/km CO2, whether electric or not, can only claim a 6% deduction.

From April 2025, electric cars will also become subject to road tax, with the expensive car supplement of £425 in addition to the standard charge of £195.

As such, whilst electric cars are still more attractive from a tax perspective, the extent to which this applies is reducing.