Changes to Taxation on Double-Cab Pickups and the Employment Allowance Increase
The Autumn Budget 2024 introduced key changes that will impact businesses and employees, particularly in the areas of vehicle taxation and employers’ National Insurance (NI).
Businesses using double-cab pickups and employers looking to reduce NI costs should take note of these developments and plan accordingly.
Double-Cab Pickups: Increased Tax Liabilities from April 2025
A significant change in the Autumn Budget 2024 affects businesses and employees who use double-cab pickups. These vehicles have traditionally benefited from favourable tax treatment, but from 6 April 2025, many will be reclassified as cars for tax purposes.
What’s Changing?
- From April 2025, most double-cab pickups will no longer be classified as commercial vehicles for tax purposes.
- This means:
- Employees using them for work will face a higher benefit-in-kind (BIK) tax charge.
- Businesses will see a reduction in capital allowances they can claim against profits.
What Remains the Same?
- For VAT purposes, double-cab pickups will still be considered vans, provided they meet existing criteria.
- To qualify as a commercial vehicle, the pickup must be designed to carry at least 1,000 kg (one tonne).
Transitional Rules for Existing Vehicles
- If a double-cab pickup was bought, leased, or ordered before 6 April 2025, it can continue to be taxed under the existing rules until:
- It is sold,
- Removed from the business, or
- The lease expires (or latest by 5 April 2029).
Key Takeaway
From April 2025, HMRC will no longer use VAT classification to determine tax treatment. This means that most double-cab pickups will be taxed as cars instead of vans, leading to higher tax costs for businesses and employees.
Businesses that rely on these vehicles should review their fleet strategy and consider purchasing before April 2025 to benefit from the transitional rules.
Employment Allowance Increase: Relief for Businesses from April 2025
The Autumn Budget 2024 also included some positive news for businesses facing rising costs due to the increase in employers’ National Insurance contributions (NICs).
What’s Changing?
- From April 2025, employers’ NICs will increase to 15% on earnings over £416 per month.
- However, the employment allowance (EA)—which helps small and medium-sized businesses reduce their NI bill—will increase from £5,000 to £10,500 per year.
How Does Employment Allowance Work?
- The EA reduces the total employers’ NI liability until the allowance is used up.
- For example, if your employers’ NI liability is £1,000 per month, the allowance would cover 10.5 months, meaning you wouldn’t need to pay any employers’ NICs until February 2026.
Who Can Claim Employment Allowance?
The EA is available to most businesses, but some are excluded, including:
- One-person companies where the only employee is also a director.
- Public sector organisations undertaking more than 50% of their work in the public sector (except IT, security, or cleaning services).
- Employers of domestic workers (such as nannies or personal assistants).
A key point to note is that if a company has multiple directors, the full £10,500 EA can still be claimed as long as at least one non-director employee is earning more than £5,000 per year.
Key Takeaways for Businesses
- Double-Cab Pickups: Plan Ahead for Increased Tax Liabilities
- Most double-cab pickups will be taxed as cars from April 2025.
- If your business relies on these vehicles, consider purchasing or leasing before April 2025 to benefit from transitional relief.
- Employers’ NI Costs Are Rising, But Relief Is Available
- Employers’ NICs increase to 15% from April 2025.
- The employment allowance increases to £10,500, helping reduce payroll costs.
- Review Eligibility for Employment Allowance
- Ensure your business qualifies for EA to maximise tax savings.
- If you employ multiple people, you can take full advantage of the allowance.
Final Thoughts
While the changes to double-cab pickups will lead to higher tax bills, the increase in employment allowance provides a much-needed offset for rising employer costs.
Businesses should act now to review their vehicle use, tax planning, and payroll strategies to minimise tax liabilities and take advantage of available reliefs. Merranti can help
