Tax: what is company pick-up tax?

If a driver uses a company double or single cab pick-up for private mileage, he or she must pay company pick up tax.

Currently, HM Revenue & Customs classifies these pick-ups as vans – as long as they have a payload of 1 tonne (1000kg) or more.

A payload means the vehicle’s gross vehicle weight less its unoccupied kerb weight. Where a pick-up has a hard top, this is given a generic weight of 45kg. So a pick-up that has a payload of 1010kg will convert to a car under these definitions. So it’s important to ensure your pick ups qualify.

For the tax year 2006/07, the annual tax liability was £500. So if a pick-up driver paid income tax at 40%, he or she paid 40% of £500: an annual bill of £200.

However, this tax rose significantly from the 2007/08 tax year onwards. Instead of the £500 annual company pick up tax liability, it increased to £3000. So the annual tax bill for a 40% tax payer rose from £200 to £1200.

If the company also pays for private fuel, the driver is taxed on this, too. The annual company pick up tax liability for free fuel rose from April 6, 2010 to £550. So a 40% income tax payer will be charged 40% of £550 for free fuel: £220 per year. That’s in addition to the £1200 company pick-up tax.

However, if the driver covers no private mileage, there is no tax to pay. The taxman does not count driving the pick-up between home and work as private mileage. So if you take the pick-up home at night and do no other mileage, you do not have to pay company pick-up tax.

The taxman allows some ‘insignificant’ private use: such as dropping a child off at school on the way to work. But if the pick up is regularly used to do the supermarket run, that is counted as private mileage.