UK Commercial Vehicle Taxation

Commercial vehicles are essential for thousands of UK businesses — from delivery vans and construction pickups to fleet vehicles and electric vans. But when it comes to tax, it’s vital to understand how HMRC treats commercial vehicles differently from company cars, and how upcoming 2025 changes may affect you.

What Is a Commercial Vehicle?

A commercial vehicle is primarily used for business purposes — to transport goods, equipment or people — and not for personal use. Common examples include panel vans, pick-up trucks, and lorries.

The classification matters because it determines how the vehicle is taxed for both income tax and road tax purposes.

What Is Classed as a Commercial Vehicle for Tax Purposes?

HMRC considers a vehicle to be commercial for tax purposes if it is:

• Designed primarily for transporting goods or tools

• Not built or marketed primarily for private use

• Has no rear seats or side windows (in the case of vans)

A double cab pickup, for example, may qualify as a commercial vehicle if it has a payload of over one tonne. If the payload is under that threshold, it may be treated as a car.

The classification affects everything from Benefit in Kind (BIK) tax to VAT reclaim rules.

How Does HMRC Define a Commercial Vehicle?

According to HMRC guidance (especially EIM23110), a commercial vehicle is:

• A van, defined by the Vehicle Excise and Registration Act 1994 as a goods vehicle with a design weight of no more than 3,500kg

• Not a car for BIK purposes unless it is clearly intended for private transport

• Usually a vehicle with no rear seats, windows, or trim

HMRC considers the primary design and use of the vehicle — not just how it's actually used day to day.

What Are the Key Requirements for Commercial Vehicles?

To be treated as a commercial vehicle for tax purposes, the vehicle should:

• Be used mainly for business travel

• Be available for work-related journeys (e.g. deliveries, site visits)

• Meet the physical criteria defined by HMRC

• Have a payload of over 1,000kg (for pickups)

It’s also important to document business use properly, especially where there is incidental or occasional private use.

What Are the Tax Implications of Commercial Vehicles?

For Employers and Employees:

If a commercial vehicle is provided to an employee for business use, and there is no significant private use, it may fall outside of Benefit in Kind (BIK) tax altogether.

Where there is private use, HMRC applies a fixed BIK charge rather than the emissions-based system used for cars. For 2024/25:

• Van BIK: £3,960

• Fuel benefit (if fuel is provided for private use): £757

These are fixed figures, regardless of emissions or list price, making commercial vehicles more tax-efficient than company cars.

Company Car or Commercial Vehicle?

The tax difference is significant. Company cars are taxed based on:

• List price

• CO2 emissions

• Fuel type

• Employee’s income tax band

In contrast, a commercial vehicle used privately attracts only a flat-rate BIK charge. For that reason, employers and employees often prefer vans and qualifying pickups over company cars, especially for mixed-use roles.

What Is the Road Tax on Commercial Vehicles?

Vehicle Excise Duty (VED), also known as road tax, is different for vans than for cars.

• Light goods vehicles (LGVs) registered before April 2017 pay tax based on weight and emissions

• Vans registered after 1 April 2017 pay a flat annual rate, currently £320

• Zero-emission vans currently pay £0, but this is set to change from 2025

For pickups, if they qualify as commercial (payload over one tonne), they follow van tax rules.

Commercial Vehicle Tax Changes

Commercial Vehicle Tax Changes (Effective April 2025)

From April 2025, HMRC is introducing changes that affect Benefit in Kind tax for double cab pickups.

Previously, these vehicles were treated as commercial and taxed using the fixed van rate if the payload exceeded 1,000kg. However, under the new rules:

• Most double cab pickups will be reclassified as cars for tax purposes

• This means BIK will be based on list price and CO2 emissions — which can significantly increase tax for employees

There will be transitional relief for some existing vehicles until April 2028, but new pickups purchased after April 2025 will likely lose the van tax treatment unless clearly commercial.

Electric vans will also see a shift in road tax:

• From 2025, electric vans will begin paying standard VED, though still at a lower rate than petrol or diesel

Are Pick-Up Trucks Affected by the Tax Changes?

Yes. Double cab pickups are the main vehicle type impacted by the 2025 changes.

HMRC will no longer allow the flat van BIK treatment unless the pickup has genuinely commercial design and use, and a payload over one tonne that’s not compromised by luxury interiors or dual purpose.

This change is significant for businesses using pickups for combined work and private use. Employers may need to reassess the viability of offering these vehicles as company perks.

Final Thoughts              

Commercial vehicles have long been a tax-efficient choice, especially when private use is minimal. But with 2025 changes on the horizon — especially the reclassification of pickups — now is the time to review your fleet, employee benefits, and company car policies.