Diesel drivers in the UK are facing potential car tax increases of up to £15,000 per year following changes to Benefit-in-Kind (BiK) rates announced by Chancellor Rachel Reeves in the Autumn Budget. The new regulations, set to take effect in April 2025, will particularly impact double cab pick-up trucks, which will be reclassified as cars for tax purposes.
Current Situation and Changes
Currently, light commercial vehicles like double cab pick-ups with a carrying capacity of one tonne or more are subject to a flat BiK tax rate of £3,960 annually for company drivers. However, from April 2025, the BiK rate for these vehicles will be calculated on a sliding scale based on their emissions. Diesel vehicles, known for their high emissions, will be hit with the highest BiK rates ranging between 25% and 37%.
Impact on Businesses and Drivers
Experts warn that this change could significantly increase tax bills for businesses and tradespeople who rely on these vehicles. Many are expected to switch to vans or electric alternatives to reduce the tax burden. “The new regulations may lead businesses in industries like construction and farming to rethink their pickup vehicle fleets,” said a motoring expert from Bumper. “While reliable, double cab pick-ups will face higher BiK taxes, which will lead to increased costs for employers due to added National Insurance contributions.”
Transitional Arrangements
However, HMRC has announced transitional arrangements for businesses that purchased, ordered, or leased double cab pick-ups before April 2025. These businesses can continue using previous tax treatments until the vehicle is disposed of or the lease expires before April 5, 2029. This gives existing users some flexibility before and after the new tax rules are implemented.
Broader Context
The changes are part of a broader shift towards more environmentally friendly vehicles. Electric vehicles, with their lower emissions, will attract lower BiK rates, potentially encouraging businesses to switch to more sustainable options. The Association of Chartered Certified Accountants noted that HMRC will no longer align its interpretation of ‘car’ and ‘van’ for tax purposes with VAT definitions, affecting how double cab pickups are classified for BiK and profit deductions.
As the April 2025 deadline approaches, experts are advising businesses to review their tax positions and consider alternatives to mitigate the impact of the new regulations.
