Commercial and electric vehicle tax changes

As an Associate Director at Prime, I have more than a decade’s experience advising on tax affairs and lead our expert personal tax compliance department.

Here, I answer some of the most frequently asked questions about the upcoming commercial vehicle tax changes. If you have a question, please don’t hesitate to get in touch.

Double cab pickup tax changes

HMRC has removed the double cab pick up tax break which could leave drivers up to £8,000 worse off, according to our sums.

From the start of April 2025, the government will tax double cab pickups as cars – a move which was hidden in the small print of the 2024 Autumn Budget.

Popular vehicles such as the Nissan Navara and Ford Ranger have historically been classed as commercial vehicles, meaning they have enjoyed significant benefit-in-kind (BIK) tax breaks.

The government is also changing the rules on electric, zero or low emission cars, vans and motorcycles, which will no longer qualify for free vehicle tax from April 1.

What is the impact of the double cab pickup tax rules?

The new double cab pickup tax rules are something of a double-whammy – a significant increase in taxation for employees, plus a reduction in the tax breaks available for businesses.

Action is needed before March 31, so if you’re renewing your double cab pick up company car, your tax liability will increase. This is unless you take delivery before then to benefit from another four years of the old rules, giving you time to make a decision on what vehicle is next.

The changes come in from April 1 for corporation tax purposes and April 6 for income tax purposes.

These pickup truck tax changes will also lead to significant increases in National Insurance contributions for employers.

The current cost to a company for a double-cab pickup classed as a van is £144 in Class 1a National Insurance contributions.

Under the new rules a Class 1a contribution will rise to 15 per cent on that benefit, taking it to £3,402 per year.

What will double cab pick-up tax changes cost me?

The change could be worth as much as £8,000 per vehicle, based on a cost from new of £33,500.

• For a diesel Nissan Navara double-cab pick-up with an estimated list price of £33,500 and Co2 emissions of 248g/km, the total benefits in kind would be £4,717 if classified as a van
• The income tax due on this benefit would be £943 for a basic rate taxpayer or £1,887 for a higher rate taxpayer.
• When the vehicle is recategorised as a car, the benefit in kind would be £22,681, costing a basic-rate taxpayer £4,536 and a higher-rate taxpayer £9,072
• This would mean an overall increase in the tax burden of £3,593 for a lower-rate taxpayer and £7,185 for a higher-rate taxpayer

What are the key electric vehicle tax changes?

Alongside the commercial vehicle tax changes coming into force in April 2025, there will also be significant changes to the rules for owners of electric, zero or low emission cars, vans and motorcycles.

From April 1, 2025, owners of these types of vehicles will be liable to pay vehicle tax, bringing them in line with owners of petrol and diesel cars. This applies to both new and existing vehicles.

How will the changes affect me?

The changes to electric vehicle tax and other affected vehicles will depend on several factors:

• Owners of electric, zero or low emission cars registered on or after 1 April 2025 will pay £10 for the first year and £195 from year two onwards
• Owners of electric, zero or low emission cars registered between 1 April 2017 and 31 March 2025 will pay £195
• Owners of electric, zero or low emission cars registered between 1 March 2001 and 31 March 2017 will pay £20

For hybrid vehicles and alternatively fuelled vehicles (AFVs), the £10 annual discount has been removed. In addition:

• Any vehicle registered before 1 April 2017 will pay tax based on the vehicle’s CO2 emissions
• Any vehicle registered on or after 1 April 2017 will pay £195

Drivers also need to consider three further electric vehicle tax changes which will increase their tax burden:

• Most electric vans will now pay the same tax as the standard rate for light goods vehicles
• Any owners of electric motorcycles and tricycles will pay the annual rate for the smallest engine size
• New electric or zero emission vehicles which are registered after 1 April 2025, and have a list price greater than £40,000, will play the standard rate of £195 immediately, plus the expensive car supplement of £410 once the vehicle is a year old. This payment will be made for five years