The Autumn Budget hasn't delivered vital tax breaks to support demand for plug-in hybrid and electric company cars, fleet specialists have warned.
For operators, the Chancellor’s most important announcement was benefit-in-kind (BIK) tax rates for the 2030/31 tax year, following repeated industry calls for clarity given that drivers are already ordering cars that will still be on the road in April 2030.
Company car drivers (including those on salary sacrifice schemes) pay BIK for the perk of using that vehicle for private journeys. It’s effectively treated as an additional salary and taxed at the same rate as their income (typically 20% or 40%).
Since 2002, the car’s taxable value has been calculated as a percentage of its list price. Cars fall into one of 27 percentage bands, currently ranging from 4% to 37%, and the pricier and more CO2-intensive a car is, the higher the tax cost.
It’s a powerful incentive: three quarters of company car drivers are paying BIK tax on a vehicle emitting less than 50g/km, according to the latest HMRC data.
The Budget confirmed that all rates will rise by one percentage point in April 2030, with EVs facing the steepest rises in that period: from 4% in 2026/27 to 10% in 2030/31.
For a 20% taxpayer in a Volkswagen ID 3 79kWh Style, that equates to monthly BIK bills increasing from £27 to £67.
PHEVs fare worse. The 2024 Budget removed incentives for vehicles emitting between 1 and 50g/km CO2 to offer a longer electric range, placing all of them into a single 18% band.
The Volkswagen Golf eHybrid, with an 88-mile electric range, will rise from 7% BIK today to 20% in 2030/31 – with resulting monthly BiK tripling from £44 to £133.
Dave Bushnell, director of consultancy and strategy at Fleet Operations, said that the announcement was welcome as a step towards restoring confidence but it could have gone further.
“We’re disappointed that the Chancellor hasn’t taken this opportunity to make used electric company cars more affordable,” he said.
“Drivers are still taxed on a vehicle’s original list price, even when it has depreciated significantly. Changing this could have opened up electric cars to more employees through salary sacrifice schemes while also helping to boost demand in the second-hand market and support residual values.”
