Now the dust has settled on Rachel Reeves' Autumn budget, we look at some of the responses from the fleet sector.
Autumn Budget – the fleet overview
“With the massive swing towards electric cars seen in the fleet sector in recent years, there was perhaps an expectation that we would start to see benefit-in-kind begin to creep upwards and these figures are probably at the lower end of our expectations.
“This new certainty around tax will, in our opinion, maintain the ongoing electrification of car fleets, especially in establishing a marked differential compared to hybrids. Similarly, the increased differential in first-year tax rates for electric cars is to be welcomed although, being a one-off cost, will have a much more limited impact.”
Paul Hollick, chair of the Association of Fleet Professionals (AFP)
“While it does bring some bring additional tax, the decision on company tax is welcome in that it should help to maintain impetus behind the whole electrification project.”
Peter Golding, MD FleetCheck
Overall, this Budget will have come as a relief to fleet operators. While businesses will face increased expenses, they can also benefit from stable fuel costs and improved infrastructure through road maintenance improvements. vanfleetworld.co.uk
Fuel duty freeze
The ongoing freeze in fuel duty and the Government deciding not to implement a widely predicted scrapping of the 5p discount surprised many across the industry. “Petrol and diesel prices are historically quite low, but this remains good news for fleets who are working hard to keep their spending under control.
Paul Hollick, chair of the Association of Fleet Professionals (AFP)
“By maintaining the fuel duty freeze, the government offers predictable fuel costs, helping fleet managers control expenses and avoid passing on additional costs to customers. This is particularly advantageous for smaller operators, providing much-needed stability amid rising business expenses.”
David Bushnell, Fleet Operations
“Also, while petrol and diesel pump prices are at a lower level than they have been for some time, there seems to be a recognition from government that both business and individuals need further protection. Both moves are very welcome.”
Peter Golding, MD FleetCheck
Company car tax
BiK tax rates continue to incentivise EV take-up with the rates increasing by only two percentage points per year in 2028/29 and 2029/30, reaching 9% in 2029/30.
Government’s announcement of two more years of certainty is much needed and their recognition of the importance of providing ‘long term certainty for taxpayers and industry’ means that we have been heard. Although an increase of 2% per annum is more than the 1% escalator that we would have liked, at a time when fiscal head-room is limited, moderate increases, with certainty, up to 2030 is welcome. As is the continuation of salary sacrifice, a critical enabler of a fair transition. BVRLA
Plug-in Hybrids (PHEVs)
Company drivers currently paying the PHEV benefit-in-kind rate of 5%, will see that rate rocket to 18% by 2028/29 thanks to the Autumn budget.
PHEVs have increased in popularity in the last year, due to new models with extended electric range (up to around 80 miles) which qualifies them for the preferential 5% BiK rate, especially in regions where charging may be an issue, making full-EVs problematic. However, it seems the Government wants to discourage this approach.
“Quite a few drivers have seen these cars as a useful stepping stone to going fully electric, sidestepping concerns about range anxiety and the charging infrastructure, and they have made their way onto an increasing number of choice lists.
“While there is only a couple of percentage points difference in Benefit-in-Kind between an EV and PHEV for a driver today, that rises to a difference of 7% and 18% in four years. Not many people are going to want to pay that bill.”
“With the recent clarification that hybrids would be allowed to remain on sale until 2035, there was arguably a slight pull against zero emissions mandate targets. Now, it looks like their thinking is much more consistent, especially the fact there will be a high, flat rate for all PHEVs from 2028/29.
“If you are getting a company car, the Government wants it to be an EV. The new wave of PHEVs are now more likely to find sales in the private sector.
“Individual consumers are showing quite a high level of resistance to EVs for a variety of reasons and PHEVs provide a solution, as long as people are willing to pay the newly increased first-year vehicle excise duty.”
Peter Golding, MD, FleetCheck
Reports suggest that, since the Budget, company car drivers who have placed orders for PHEVs have already begun to contact their leasing firms to cancel the agreements, asking if they can swap to full-EVs instead.
Fuel duty v EV charging excesses
"While the Chancellor not only retained the 5p per litre fuel duty cut for another 12 months, she also extended the ongoing freeze in inflation-linked rises which has been in place since 2011. It’s predicted that dropping this wouold have caused a 7p per litre rise in pump prices.
"However, the Chancellor failed to control the cost of public charging. That means that drivers plugging into a rapid chargepoint are paying the same for that electricity as a driver with a petrol car averaging 30mpg.
"Calls to bring the 20% VAT rate for public charging in line with the 5% paid for plugging in at home have not been listened to. This makes it much harder for drivers and fleets who depend on public charging to make a business case to go electric."
Matthew Walters, Ayvens
2030 ICE deadline
“The Government’s prior commitment to reinstating the 2030 ICE ban was a positive step to help realise the UK’s net zero targets. It’s good to see that pledge becoming reality along with the funding and incentives measures announced in the Autumn Budget.”
Mike Nakrani, CEO of VEV
Freeze in VED first-year rates for fully electric cars
"From 1 April 2025, all cars registered since April 2017 will pay the same £195 rate of VED, regardless of powertrain, which removes the £10 discount for hybrids and means electric vehicles will be taxed for the first time.
"The Autumn Budget confirmed new zero-emission cars will attract a £10 first-year rate when they are registered, and this will be frozen until 2029/30, while an adjustment to the Expensive Car Supplement’s price threshold is under consideration for a future fiscal event."
Matthew Walters, Ayvens
Double-cab pick-ups
Following a Court of Appeal judgement, double-cab pickups with a payload of one tonne or more will be rated the same as cars for certain tax purposes.
From 1 April, 2025 for Corporation Tax, and 6 April, 2025 for income tax, these vehicles will be taxed the same as cars for the purposes of capital allowances, benefit-in-kind and a range of deductions from business profits.
“If ordered before the rule change, a Toyota Hilux Invincible X 2.8 Auto would be treated as a commercial vehicle, taxed at a flat rate of £3960 for 2024/25. For a 40% taxpayer, this would mean an annual BiK tax of £1,584.
“If ordered after April 2025 as a company car, with its P11D value of £47,542 and CO₂ emissions of 259g/km, the BiK rate would be 37%, totalling £17,591.
“For that same 40% taxpayer, this equates to £7036 annually, an increase of £5452 versus the current tax rate.
“Whichever pickup you currently enjoy as a company vehicle, if you are going to be in the market in the next 12-months, I would strongly advise getting a replacement on order sooner rather than later.”
Ian Smith, MD, XL Marketing via Fleetpoint.org
Expensive car supplement
“All vehicles registered on or after 1 April 2017 will also attract the £425 Expensive Car Supplement on top of their first five annual renewals if they have a list price of £40,000 or more.
“Although electric vehicle prices are continuing to fall, five of 2023’s ten most popular electric vehicles have a starting price over £40,000 (SMMT figures), including the Tesla Model Y – which was the best-seller overall. Without the suggested adjustments, some drivers would face three times higher VED renewals for an EV than they would in an equivalent petrol, diesel or hybrid car.”
Matthew Walters, Ayvens