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A mixed outlook C
ontinuing low company car tax rates for EVs beyond 2028 were announced in the UK Government’s Autumn Budget – but rates for plug-in hybrids are set to rise sharply. Chancellor of the Exchequer Rachel Reeves said that the government wanted to support the take-up of EVs.
Currently, EVs incur a BIK rate of 2%, and this is scheduled to increase to 3% in 2025-26, 4% in 2026-27, and 5% in 2027-28. The government has now said this rate will increase to 7% in 2028-29, and 9% in 2029-30. The rate for cars with tailpipe CO2 emissions of 1-50g/km, which mostly covers plug-in hybrids, will rise to 18% in 2028-29 and 19% in 2029-30. These rates are currently between 2% and 14%, and will be between 5% and 17% in 2027-28, depending on the car’s EV battery range.
All other BIK bands will see a 1% increase in 2028-29 and 2029-30, including an increase in the maximum rate, from 37% to 39%. The government also announced that the differential between full EVs and other vehicles in the first- year rate of VED would be increased from April 2025. First-year VED will be set at £10 for EVs and other zero-emission vehicles from 1 April 2025 until 2029-30.
Other rates will increase for 2025-26 – to £110 for cars emitting 1-50g/km of CO2, and to £130 for cars emitting 51-75g/km, while rates for cars emitting 76g/km or more will be doubled. The government also said it would consider increasing the VED Expensive Car Supplement
4 | November/December 2024 |
www.businesscar.co.uk
threshold for zero-emission cars at a future fiscal event. Other measures announced in the Budget included a continued freeze to fuel duty for the 2025-26 financial year, including the maintaining of the fuel duty freeze which has been in place since 2011, and also the continuation of the 5p cut which was introduced in March 2022. Also announced were an extra £500 million for pothole repairs via local roads maintenance funding, and more than £200 million for EV charging infrastructure. More than £2 billion was also announced to support the automotive sector, in relation to zero-emission vehicle manufacturing. Reacting to the Budget, Association of Fleet Professionals (AFP) chair Paul Hollick said it could be viewed as a government tidying-up operation regarding company cars, referring also to a change in categorisation for double-cab pick-up trucks. He said: “The government is making it pretty clear that it wants all company car drivers behind the wheel of a zero-emissions electric car while paying BIK at the standard rate. Almost anything that resembles a departure from this model has gone.
“There’s an argument that this provides a high degree of clarity for fleets but it does also mean that some drivers and employers are facing some big bills unless action is taken, and when it comes to PHEVs and double-cabs, this is likely to lead to widespread redrawing of choice lists with a renewed emphasis on EVs.
“Drivers who have recently taken on a PHEV on a four-year cycle will see their tax rise massively in its last year.”
Currently, EVs incur a BIK rate of 2%, this is scheduled to increase to 3% in 20225-26, 4% in 2026-27, and 5% in 2027-28.
There was contrasting news from the new Labour government’s first Budget for drivers of electric and plug- in hybrid company cars. Sean Keywood reports.
Hollick added that the AFP generally welcomed the certainty provided by having BIK tax tables published through to the end of the decade. He said: “This is something that we have been requesting for some time because it means that fleets can plan for the future with certainty. While we don’t want to see BIK on electric cars rise to 9% by 2029/30, we’ve accepted for a while that this will have to happen at some point, and the process appears to be being managed by the government in a structured and responsible manner.
“Looking at these new tax tables, the ZEV mandate, the strengthening of EV favourability under VED, extending 100% first-year allowances and more, the government could not be making it clearer across a range of policy that fleets should be looking entirely at zero emissions electric cars. When employers start redrawing choice lists, this should be treated as a central fact.”
Giving his Budget reaction, BVRLA chief executive Gerry Keaney said: “This was a complex budget at a difficult time. The increase in employers’ national insurance will have a substantial impact on businesses and their customers. The full scale of its impact will only be seen in time.
“For our sector, the Chancellor has left many challenges unresolved. As penalties to stay in ICE vehicles ramp up in line with the ZEV mandate, more needs to be done. The barriers relating to the rental sector, charging infrastructure, consumer education and the used EV market, all need close attention. “The Budget did bring some green shoots of positivity, suggesting that the government is taking
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