Choosing the right vehicle for your business isn’t just about functionality—it’s also about tax efficiency. If you’re planning a new purchase, it’s essential to know how your vehicle will be treated by HMRC. The answer could significantly impact your capital allowances and benefit-in-kind (BIK) tax liability.
From 6 April 2025, key changes will come into effect, especially for popular models like double cab pick-ups. Understanding the rules now can help you avoid costly surprises later.
- How HMRC Classifies Vehicles for Tax
- Are Double Cab Pick-ups still available for tax allowance in 2025?
- What is the classification of a company vehicle?
- How to Know If Your Vehicle Qualifies for Capital Allowance and BIK in 2025?
- How to Calculate Benefit-in-Kind on a Company Car?
- Why This Matters for Business Owners?
- Ready to Make a Smart Business Vehicle Purchase?
How HMRC Classifies Vehicles for Tax
HMRC treats all vehicles as cars by default, unless they fall into one of the following categories:
A vehicle qualifies as a commercial vehicle for tax purposes if it is constructed primarily for carrying goods or burden, is not suitable for private use, or is a motorcycle. To be classified as a van, the vehicle must be a goods vehicle, must not exceed a design weight of 3,500 kg, and must not be a motorcycle.
This classification affects how the vehicle is treated for company car tax and capital allowances.
Are Double Cab Pick-ups still available for tax allowance in 2025
From 6 April 2025, double cab pick-ups will no longer be taxed at the flat BIK rate of £3,960. Instead, they will be treated the same as cars and subject to BIK rates based on CO2 emissions, which can range from 2% to 37%.
Even electric double cab pick-ups with a payload over 1 tonne will be affected. They will start at a 3% BIK rate in 2025, increasing by 1% each year until reaching 6% by 2028.
This change makes it critical to review your choice of vehicle, especially if you’re relying on previous tax treatment.
What is the classification of a company vehicle
The tax classification of a vehicle depends on how the vehicle is built, not how you intend to use it.
Here are some examples:
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Combi Vans / Crew Vans: These have a second row of seats. If the passenger space is similar in size to the loadspace, HMRC typically classifies them as cars, as confirmed by the Coca-Cola case.
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Land Rover Defender (Commercial Model): This version has no rear seats or windows, making it closer in structure to a van. It’s more likely to qualify as a commercial vehicle.
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Converted Minibuses / Campervans: While a standard minibus may qualify as unsuitable for private use, once converted for leisure or sleeping, it is usually reclassified as a car.
How to Know If Your Vehicle Qualifies for Capital Allowance and BIK in 2025
A vehicle qualifies for capital allowance and favourable benefit-in-kind treatment in 2025 if it is constructed primarily for carrying goods or equipment. For double cab pick-ups, the loadspace must clearly be larger than the passenger area. The vehicle must also be unsuitable for private use—for example, it may have no rear seats, no side windows, or be designed specifically for commercial purposes. Meeting these criteria increases the likelihood of being treated as a commercial vehicle for tax purposes.
How to Calculate Benefit-in-Kind on a Company Car
To calculate benefit-in-kind tax, apply the following formula:
BIK Value = P11D value × BIK rate × Income tax rate
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The P11D value is the list price including VAT and delivery.
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The BIK rate is based on the vehicle’s CO2 emissions and fuel type.
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The income tax rate depends on your tax band—typically 20%, 40%, or 45%.
Tools like a benefit-in-kind calculator can help you get a quick estimate, but professional advice is always best if you’re unsure.
Why This Matters for Business Owners
Choosing the wrong vehicle—or assuming the tax rules haven’t changed—could leave you with a significantly higher BIK tax bill and lower or no capital allowance relief.
Before you buy, check:
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Whether the vehicle meets HMRC’s definition of a commercial vehicle
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Whether your expected tax treatment still applies under 2025 rules
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Whether the construction and technical specifications support your case
Ready to Make a Smart Business Vehicle Purchase?
If you’re about to buy a vehicle for your business, don’t leave the tax treatment to guesswork. With over 20 years of experience, we specialise in helping business owners make tax-efficient decisions that maximise capital allowances and minimise benefit-in-kind (BIK) costs.
Speak to an expert today and get clear, tailored advice before you buy. Let’s make sure your next purchase saves you money—not surprises you with tax.
