The Chancellor, Jeremy Hunt, said he had listened to the fleet industry and would increase company car tax for EVs by one percentage point year-on-year for three years from 2025.
Currently, BIK for a pure EV is 2% (2022/23) and remains at that rate up to April 2025. The Chancellor’s announcement means that it will increase to 3% in 2025/26, to 4% in 2026/27, and 5% in 2027/28.
Paul Hollick, chair of the Association of Fleet professionals (AFP), said: “We have been strongly expressing that the position of EVs in the UK fleet sector remains at a relatively early stage of adoption and the increases in company car taxation, of 1% percent per year, seems well-judged to us at first glance.
“Crucially, they will allow fleet decision makers to plan for the second half of the decade as they continue the process of electrification.
“This is something for which we have been campaigning in conjunction with BVRLA and it is to be welcomed.”
Ashley Barnett, head of fleet consultancy at Lex Autolease, said that the publication of company car rates beyond 2025, “reaffirms” the Government’s commitment towards a greener future and gives decision makers the clarity they need to accelerate their transition towards EVs.
He added: “Fleet replacements typically operate in four-year-cycles and today’s announcement paves the way for future purchasing decisions – giving them the confidence they need to commit to a long-term sustainability plan.
“With longer lead times from manufacturers delaying the delivery of many vehicles, having clarity beyond 2025 is a major boost for future electric fleet decision making.”
The Government said that setting rates for company car tax until April 2028 would provide “long-term certainty” for company car drivers and rates would continue to incentivise the take-up of EVs.
It explained that the appropriate percentages for electric and ultra-low emission cars emitting less than 75g/km will increase by one percentage point in 2025-26; a further 1% in 2026-27 and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars.
Rates for all other vehicles bands will be increased by one percentage point for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.
The one percentage point year-on-year rise will be worth an additional £95 million to the Treasury in 2025/26, £155m in 2026/27 and £245m in 2027/28.
BVRLA Chief Executive, Gerry Keaney, added: “Today marks a key milestone in the UK’s transition to zero emission motoring and cements the momentum we have gathered in recent years.
“Our sector is the driving force behind getting cleaner, greener vehicles on UK roads, with the tax regime a critical lever in making it happen.
“Our #SeeTheBenefit campaign had clear asks around keeping rates low and giving drivers confidence in future rates.
“The Government has listened. We have engaged with MPs, the Treasury and the Chancellor directly, with our voice bolstered by input and letters from thousands of BVRLA members and industry professionals.
“Benefit-in-kind rates remaining fair, alongside the clarity provided by years of foresight, gives us a clear path on the road to net zero. The long-term health of the market has been boosted by today’s announcement.”
Ian Hughes, CEO of the corporate division at Zenith Vehicles, paid tribute to how the industry had campaigned to keep BIK low. “From trips to Westminster to speak with MPs to reaching out directly to Government officials, we’ve been committed to campaigning and educating Government on how pivotal Benefit-in-Kind tax is on the uptake of electric vehicles,” he said.
“Following the Chancellor’s announcement, we’re thrilled that the work we’ve done in conjunction with the BVRLA has paid off, and Government is continuing to support and recognise the role fleet plays in its net zero ambitions.
“By setting appropriate BiK rates for the foreseeable future, we expect the current growth trends, of which nine out of 10 orders in our salary sacrifice order bank are electric vehicles, will continue as we support our customers on their sustainability ambitions.”
