Is your work van now a car? HMRC’s new tax rules explained

If you own a van for work, and in particular a crew cab (double cab) pickup, HMRC might have just quietly reclassified it as a car without informing you. We’ve found that many business owners haven’t realised yet, and how it could cost you thousands in extra tax, even if you haven’t changed your vehicle.

So, here’s our breakdown (pardon the pun!) of what has changed, why it is important, and how to avoid a key mistake.

When is a van not a van?

HMRC tightened the definition of what counts as a van in some instances back in April 2025, separating the tax classification from the VAT classification. Double cab pickups (vehicles with a second row of seats like crew cabs) are more likely to be treated as cars for tax purposes.

As the HMRC state:

“Most double cab pickups are expected to be classified as cars … because typically these vehicles are equally suited to convey passengers and goods and have no predominant suitability.” (1)

This simple shift from ‘van’ to ‘car’ affects:

The level of tax relief when you buy it
How much tax your business pays when allowing you or your employee(s) to use it
How you are taxed personally if you use it

Tax relief on vehicle purchases

How HMRC views vans and cars for tax relief.

– Vans

If a vehicle qualifies as a van, you can often claim 100% tax relief upfront using the Annual Investment Allowance.

For example:

You buy a van for £30,000. If it qualifies as a van, that £30,000 investment comes off your profits immediately. So if your annual net profit was £50,000, it now drops to just £20,000. This could equate to £7,500–£7,800 tax saved, depending on your business structure.

– Cars

Upfront tax relief is only available for brand new electric cars, as tax relief is now based on emissions. Typically this limits your tax relief to around 6% per year. So a £30,000 van classified as a car only ‘earns’ tax relief of £450 in year one and decreasing amounts in subsequent years.

The personal tax trap (benefit in kind)

If you run a limited company, or give the van to your employee to use, this can affect personal tax too. If it’s the vehicle that’s ‘available’ to use privately, the tax costs stack up quickly. The complete tax cost will include:

A fixed, relatively low ‘benefit in kind’ tax costs
Roughly £1,000 personal tax per year
Around £750 business tax bill in employer national insurance

This brings the tax bill to a potential £1,750 per year.

There are two other exemptions that apply to vans and not cars for personal tax:

The van is used for ‘insignificant private use’, such as the odd trip to the local tip twice a year.
Using the van to commute to work.

If either of these apply, there is often no benefit in kind charge to consider.

However, no such exemptions exist for cars that are ‘available’ for private use.

The tax liabilities are based on:

The vehicle’s value when new (the ‘list’ price)
The emissions

It also depends on who pays for the fuel. For a typical diesel crew cab pickup that’s being fuelled by the business, the costs can add up quickly. They could be around:

£6,000 personal tax
£4,000+ employer National Insurance

That’s £10,000+ per year on exactly the same vehicle after the new change from van to car.

HMRC and primary purpose

At a basic level, HMRC looks at the primary purpose of the vehicle:

Is it mainly for carrying goods? → Van
Or is it more like a passenger vehicle? → Car

The more it looks like a car, perhaps with extra seats, rear windows and features for comfort rather than business, the more HMRC are likely to view its primary purpose as a car:

“If a vehicle is designed and marketed as a multi-purpose vehicle, it is likely to be a car… If neither purpose predominates, then it is likely to be a car.”

and

“If a vehicle has side windows behind the driver and passenger doors, it is also unlikely to fall within this [van] exception.”

Coca-Cola recently lost a court case with HMRC over whether certain VW Kombis were vans. The court ruled that they were cars, not vans, due to the presence of, amongst other considerations:

Rear seats
Windows
Passenger-style design

For more info, see:

The 1 tonne rule, and vehicle financing

Before April 2025, if a vehicle had a payload over 1 tonne, it was generally treated as a van for tax purposes. This generally now only applies to VAT recovery.

If you’re buying the vehicle on finance, to claim the upfront tax relief outlined above, you usually need to be treated as the owner for tax purposes. This usually works with hire purchase agreements but NOT with leasing.

If you are paying ‘monthly rentals’, which often have VAT applied to them, then this usually isn’t the type of finance where you count as the owner for tax purposes. Some agreements sit somewhere in the middle (e.g. ones with balloon payments), so it’s important to check.

Already own a double-cab pickup?

If you already owned one of these vehicles before April 2025, transitional rules apply. So you can keep the vehicle’s current tax treatment for now. However, the previous treatment ends when:

You replace the vehicle
Renew a lease
Still own the vehicle after April 2029

Actions to take now

If you currently have one of these vehicles, don’t assume the next one will be treated the same. This is where we think many business owners will get caught out by replacing like-for-like, and assuming nothing has changed.

Tax isn’t everything

When considering what vehicle you buy, or keep, you still need to factor in:

Running costs
Fuel (a big consideration at the moment)
Insurance
If the vehicle is still appropriate for your business
The impact on your carbon emissions or any net zero ambitions

When buying a vehicle, a little thought (and a calculator) is often needed before making the purchase, if you want to get a tax deduction and not cost you (or your team) extra tax.

Ask your accountant for help on the best way to buy, replace or renew vehicles and the tax implications. If your accountant doesn’t seem to know their tax from their tyres, contact us instead.

About the author

Dan Heelan is the Business Services Director of Heelan Associates, an accounting firm that helps small business owners across the UK start, survive, and grow.

With a background as a small business owner himself, he discovered his passion for accounting and tax early in his journey and now focuses on empowering fellow entrepreneurs with the knowledge and tools to navigate the financial side of running a business.

You can see and hear Dan in action in his regular: