EXPLAINING PICK-UP TRUCK TAX ADVANTAGES
Pick-up truck tax benefits may seem confusing on the surface, but when examined properly it becomes clear why a pick-up might be the best option for you or your business.
Understanding the pick-up tax advantages whittles down to just four key elements.
- Understanding LCVs
The first thing to know is that to meet the tax benefit requirements, each pick-up must be classed as a Light Commercial Vehicle (LCV).
While all single cab pick-ups automatically receive this classification, any other cab style must have a payload of at least 1 tonne to be classed as an LCV.
Remember: Hardtop canopies will reduce the payload of your pick-up. For more information on pick-up payload, click here.
- Benefit-in-Kind rates
Benefits in kind, also known as ‘fringe benefits’, are perks received by employees or directors from a company. They do not form a part of someone’s salary but instead come in the shape of assets or services such as a company car or private healthcare.
As these perks are still taxable, there are certain rules around Benefit-in-Kind (BIK) tax rates on company vehicles. With company cars, the BIK tax rate is taken as a percentage of the vehicle’s list price, with the percentage itself being directly linked to the vehicle’s CO2 emissions. This means that if the car has higher CO2 emissions, the BIK percentage of the list price will increase.
With pick-ups, however, there is a fixed BIK rate at £3,600 for tax year 2022/23. This means that the amount paid is not affected by CO2 emissions, and is just calculated using your tax bracket. Therefore, the annual tax for a 20% taxpayer would be 20% of £3,600 (£720), with a 40% taxpayer paying 40% of £3,600 (£1,440).
- VAT refunds
Assuming that the business is VAT registered, all LCVs qualify for VAT reclaims. The amount of reclaimable VAT depends on how much the LCV is used for business purposes compared to personal use. For example, if the vehicle’s business use is 70%, then 70% of the VAT can be reclaimed.
Cars, on the other hand, only qualify for VAT reclaims if they are used 100% for business. This means that a driver who travels to work in the car would lose all the reclaimable VAT, whereas only a percentage would be lost with a pick-up truck.
- Capital Allowances
LCVs also qualify as ‘plant and machinery’, meaning the purchase cost can be written off through Capital Allowances (CAs) reducing your business profits. Until 31 March 2023 a ‘super deduction’ is available for any new LCV purchase allowing you to claim 130% in-year tax relief. Purchases after this date remain qualifying for the Annual Investment Allowance so you can offset the full cost of the LCV in the first year. This is significantly quicker than with company cars, which have a write-off rate as low as 6% a year.
Check out our full range of LCV pick-ups.
(Information for guidance purposes only and subject to change)