Double U-turn on Double Cab Pick Ups

Slipped into the main Autumn Budget document was the announcement that Double Cab Pick-ups (DCPU) will be treated as cars from 6 April 2025.

Earlier this year, the previous Government introduced guidance that all DCPUs would be classified as cars rather than commercial vehicles from 1 July 2024 but quickly backtracked following feedback from farmers and other industries. Following the Budget, on 30 October 2024, this guidance has been re-introduced for all DCPUs purchased on or after 6 April 2025 and is another change for farm businesses to navigate along with proposed changes on Inheritance Tax reliefs and immediate changes to the rate of Capital Gains Tax.

Here’s a look at what these changes mean and a reminder of the existing tax relief available on vehicles in a farming business.

Tax impact

From 1 April 2025 for companies and 6 April 2025 for sole traders and partnerships, DCPUs will no longer qualify for the Annual Investment Allowance (AIA). Instead, they will be subject to the same capital allowances as cars (see below).

The Benefit-in-kind (BIK) rates for employees using DCPUs will also increase and will based on the list price of the DCPU when new and the CO₂ emissions - invariably this will be much higher in most cases compared to the current fixed company van BIK charge.

Transitional arrangements

Businesses that purchase, lease or order a DCPU before the April deadlines can continue to benefit from the existing capital allowances until the vehicle is disposed of, the lease expires, or until 5 April 2029, whichever comes first.

Capital allowances on farming vehicles

• Agricultural vehicles

Vehicles such as tractors and quad bikes continue to qualify for AIA, which allows the business to deduct the total value of the qualifying purchase from its taxable profits in that tax year up to the current limit of £1 million.

• Commercial vehicles

Commercial vehicles such as Single Cab Pick-ups will continue to qualify for Annual Investment Allowance as above, providing the asset is used for 100% business use.

Where the asset has a mix of business and private usage the business may only claim the business element of the AIA. For example, if a farmer purchases a DCPU for £25,000 and its use is 50% business and 50% private – only £12,500 (50% of purchase price) would be allowable to deduct from their taxable profit.

• Cars

Cars do not qualify for the AIA, instead, there are other capital allowances available based on carbon dioxide emissions:

• New and unused with CO₂ emissions of 0g/km – 100% first-year allowance
• Second-hand electric car – 18% of the car’s value
• Cars with CO₂ emission of 50g/km or less – 18% of the car’s value
• Cars with CO₂ emissions over 50g/km – 6% of the car’s value

As for commercial vehicles, any car that has private use would require a private use adjustment, reducing the amount of capital allowances available.

The reclassification of DCPUs as cars for tax purposes represents a notable change in the tax landscape for farming businesses. By planning ahead and understanding the implications, you can help ease some of the financial impacts and make well-informed decisions for your business.