Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules (2024)

Anyone who plans to order a new four-door, four-seat “crew-cab” pick-up truck provided by their employer is going to face a nasty shock after July 1 this year, as HMRC (His Majesty’s Revenue and Customs) is going to massively hike the cost of benefit-in-kind (BIK) tax for such vehicles.

Currently, vans and pick-ups are part of a pretty simple taxation regime when it comes to BIK tax. As long as they have a payload of more than one tonne, they’re classified as commercial vehicles, and up until now HMRC has been tacitly allowing a certain level of social, domestic and pleasure use of such vehicles, essentially accepting that it’s all-but impossible to police such use.

The cost has been minimal to those driving the vehicles. Right now, and if you buy or are given the use of such a vehicle up to July 1 this year, you pay a flat rate for both the vehicle and any fuel costs which are covered by your employer, which adds up to £3,960 for the truck and £757 for the fuel.

Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules (1)

This is going to dramatically change when the new rules come into effect. HMRC is going to throw out the one-tonne payload rule and has decreed that any vehicle with rear seats and rear doors which could be used as a private car will be classified as a private car and assessed accordingly for BIK.

From July, anyone buying or being provided with a newly-registered crew-cab pick-up will need to pay the standard rate for cars, which is adjusted according to a vehicle’s CO2 emissions.

The trapdoor there is that most pick-ups use older-technology diesel engines, on top of which they are heavy and aerodynamically inefficient. Hence nearly all pick-ups will have emissions figures that place them in the top-tier 37 per cent BIK tax band.

Enormous tax implications

The cost implications will be enormous. Speaking to Fleet News magazine, John Messore, joint owner of Innovation Tax and Mileage Consulting Group, said: “The most common double-cab pick-up in the UK is the Ford Ranger with a list price of circa £60,000 and CO2 emissions of over 200g/km putting it squarely in the 37 per cent tax bracket meaning a BIK of circa £22,200 a year leading to employee tax of £8,880 a year for a 40 per cent taxpayer or £13,320 a year at 60 per cent tax or £1,110 a month.”

He continued: “If free private fuel is also provided (which it probably should be historically as it is currently a no brainer at such low levels of tax) that is a combined benefit of £32,486. This will have an additional Class1A NIC cost of £4,483 to the employer, whilst the total tax for a higher rate taxpayer is £12,994 per annum.”

A grace period

Any company buying a double-cab or crew-cab pick-up between now and July 1 will be allowed to operate it and be charged the old BIK tax rate until the truck is sold or traded in up to the end of the tax year, April 5, 2028.

If a pick-up has been ordered before July 1, but not made available to an employee until after that date for any reason, then the grace period still applies.

Messore did point out that there is a potential work-around, at least partially, by engaging in an employee car ownership scheme (Ecos), where the company buys the truck and then transfers ownership to the employee. However, even then there will be significant extra tax costs, both in terms of BIK and VAT, and meticulous mileage records will need to be kept for tax purposes.

The decision by HMRC to change the rules sprang from a series of court cases brought against it by Coca-Cola, which claimed that four-seat crew-cab versions of the Vauxhall Vivaro and Volkswagen Transporter vans that it was providing for employees ought to be taxed as commercial vehicles for BIK purposes.

The case went to the Court of Appeal, which decided in favour of HMRC’s decision to tax the vehicles as private cars.

The decision by both the court and HMRC has been criticised by company car taxation experts, who have said that the legislation as it stands is outdated and not fit for purpose. Potentially, more legal challenges could yet be brought, but probably not enough nor quickly enough to affect the July 1 deadline.

Or just go electric

There is one potential solution to all this, of course, and that’s to go electric. Electric cars attract a mere two per cent BIK rate, which would solve everyone’s problems here. However, there is currently only one electric pick-up truck on the market — the Maxus T90EV — and there are few, if any, signs of any others arriving soon.

Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules (2)

Ford has said that it will introduce a plug-in hybrid version of the Ranger pick-up, but we do not yet know when that will arrive nor what its CO2 emissions figure will be.

If the Ranger is getting a PHEV version, that means its twin — the Volkswagen Amarok — could do, too, but again that does not yet have a confirmed arrival date. VW has also said that it is possible to make a fully-electric Amarok, but such a model seems even further away. Driving has contacted Volkswa6 Commercial Vehicles for comment.

Toyota is experimenting with hydrogen power for its Hilux pick-up, but that is currently only at a very early prototype stage, and while mild-hybrid power will be introduced to the Hilux later this year, that won’t lower its CO2 emissions significantly.

  • What is a mild-hybrid car?

Tesla’s pure-electric Cybertruck is available to buy in America, but while listed on the UK website it is only at the “register for updates” stage, and no price nor arrival date has yet been confirmed.

Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules (3)

Ford sells both a hybrid Maverick pick-up and an electric Lightning version of its hugely popular F-150 pickup in the US market, but there are currently no plans to bring either to the UK in right-hand drive.

The same goes for the likes of the Chevrolet Silverado, GMC Sierra, Ram 1500 EV and the Rivian R1T.

In fact, the most likely candidate for a UK electric pick-up launch at the moment is Fisker, which has announced and shown its pure-electric Alaska model, which costs a mere $45,400 in the US market but which has still not officially confirmed any UK plans for the model.

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Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules (2024)

FAQs

Pick-up truck users face massive tax hike as HMRC changes benefit-in-kind rules? ›

Anyone who plans to order a new four-door, four-seat “crew-cab” pick-up truck provided by their employer is going to face a nasty shock after July 1 this year, as HMRC (His Majesty's Revenue and Customs) is going to massively hike the cost of benefit-in-kind (BIK) tax for such vehicles.

What is the road tax on pickup trucks in the UK? ›

Pickup tax rates

For many years, pickup trucks have been taxed at the same flat rates as vans. This means: Pickup road tax is £320 for 2023/2024. Pickup benefit-in-kind is £66 per month at the 20% BIK rate or £132 per month at 40% BIK rate.

Are pickup trucks classed as commercial vehicles in the UK? ›

Currently, any pickup truck that meets the criteria of having a payload of more than 1000kg (or 1045kg with a hardtop installed) is considered a commercial vehicle. This is in line with the current VAT rules, allowing business users to reclaim tax on vans and pick-ups.

What is the new road tax in the UK? ›

The current annual flat rate of road tax for the 2024/2025 tax year is £190 (up from £180 in the 2023/2024 financial year). There's a £10 annual discount for alternatively fuelled vehicles (hybrids, mild hybrids and plug-in hybrids), so their owners pay £180 a year – the same as petrol owners did last year.

How much to tax a Ford Ranger? ›

Light commercial vehicles like this are taxed at a flat rate and there's no CO2-weighted first year payment (under the TC39 VED classification), so you pay £290 a year from the first year of ownership regardless of the emissions rating of the specific version you choose.

Can you write off a pickup truck? ›

Yes, you can get a tax write-off for a vehicle over 6,000 lbs if you use it for business purposes. The tax write-off is known as the Section 179 deduction, which allows you to deduct the cost of qualifying vehicles from your taxable income.

What is the classification of a pick up truck? ›

Midsize pickups can be found in Class 1, while full-size pickups are found in Class 2, which is typically divided into two separate subsections: Class 2A and Class 2B. While the F-250, Ram 2500, and Chevy Silverado 2500 are normally considered heavy-duty trucks, they don't fall into that category according to GVWR.

Is an F250 a commercial vehicle? ›

In states that follow the federal rules, pickup trucks under 10,000 pounds GVWR are not commercial vehicles. So F250/Sierra 2500 and smaller are not commercial vehicles.

What's the difference between a commercial truck and a regular truck? ›

Extremely heavy weight: Vehicles that are used in commerce and weigh over 26,000 pounds are not only considered to be commercial vehicles but are typically subject to even more stringent federal and state regulations.

What are pickup trucks called in England? ›

lorry (n.) "a truck; a long wagon with a flat bed and four wheels," 1838, British railroad word, probably from verb lurry "to pull, tug" (1570s), which is of uncertain origin.

Why do I pay road tax UK? ›

The money that road tax raises is paid directly into the central government fund, which is used for projects that benefit everyone – including road work and maintenance.

What is the new travel tax in the UK? ›

APD rates from 1 April 2024
Domestic£7£14
Band A (0 to 2,000 miles)£13£26
Band B (2,001 miles to 5,500 miles)£88£194
Band C (over 5,500 miles)£92£202
2 more rows

What is the highest road tax for a car? ›

Cars first registered on or after 1 April 2017
CO2 emissionsPetrol cars (TC48) and diesel cars (TC49) that meet the RDE2 standardAll other diesel cars (TC49)
171 to 190g/km£1,095£1,565
191 to 225g/km£1,650£2,220
226 to 255g/km£2,340£2,605
Over 255g/km£2,745£2,605
9 more rows

What is the tax loophole for Ford trucks? ›

Section 168(k) is the current IRS tax code that allows you to buy qualifying Ford vehicles and deduct up to the full purchase price (including any amount financed) from your gross taxable income if purchased before December 31, 2023.

Which small car has the lowest road tax? ›

The Top 10 Cars With Low Tax
  • Volkswagen e-Golf. ...
  • Hyundai Ioniq. ...
  • Renault Zoe. ...
  • Vauxhall Corsa. ...
  • Nissan Qashqai. ...
  • Audi A3. ...
  • Peugeot 2008. ...
  • Ford Focus.

Are all Ford Rangers classed as commercial vehicles? ›

The Ford Ranger and other pick-up trucks are classed as commercial vehicles, which makes them remarkably affordable to run as company cars.

What vehicles are exempt from road tax in the UK? ›

Tax exempt cars
  • Electric cars. Electric cars are currently exempt from both the first-year one-off road-tax payment, and the annual charge. ...
  • Low CO2 cars. ...
  • Cars used by someone with a disability. ...
  • Historic cars. ...
  • Cars with a SORN.
Feb 2, 2023

How much road tax should I pay UK? ›

Cars registered 1 March 2001-31 March 2017
Band and CO2 emissionSingle 12-month paymentSingle 12-month payment by Direct Debit
A: Up to 100g/km£0£0
B: 101 to 110g/km£20£20
C: 111 to 120g/km£35£35
D: 121 to 130g/km£160£160
9 more rows
Apr 12, 2024

What is the foreign truck tax? ›

What Is the Chicken Tax? The Chicken Tax is a 25% tariff on light trucks imported to the U.S. The United States imposed the tariff in 1964 through an executive order issued by President Lyndon Johnson, in retaliation against European tariffs on American chicken imports.

Why does the UK pay road tax? ›

Does it Pay For the Roads? The money that goes into the Exchequer gets spent on a whole number of things which are meant to benefit everyone, ranging from teachers, the police service, hospitals, infrastructure, local projects and, yep, road work and maintenance.

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