Certainty is key to keeping fleet electrification on track
As the fleet sector continues to drive the UK's electric vehicle transition, the BVRLA outlines its core Budget priorities, urging the Chancellor to publish long-term company car BIK tax roadmaps and overhaul used EV incentives to prevent a damaging slowdown in zero-emission demand. By Toby Poston, chief executive, BVRLA
Toby Poston
Chief executive, BVRLA
The fleet sector has been at the forefront of the UK’s shift to electric vehicles, purchasing more than 70% of all new battery electric cars (BEVs) registered each year. This investment has been supported by a tax framework that makes EVs an attractive choice for businesses and drivers. As the Chancellor prepares to deliver the Budget, maintaining that momentum means providing certainty over what comes next.
Company car Benefit-in-Kind (BIK) tax is central to that.
The current BIK rate for a battery electric company car is 4% of the vehicle list price, rising to 5% in 2027/28, 7% in 2028/29 and 9% in 2029/30. There are currently no published rates beyond that point.
For drivers choosing a company car today, that creates uncertainty. Most company car and salary sacrifice agreements run for three to four years, meaning decisions are already being made about vehicles that will be driven when the current tax roadmap ends. The BVRLA is therefore calling for more rates to be published and for the electric car BIK rate to be held at 9% for 2030/31 and 2031/32.
If drivers cannot confidently calculate the cost of their next vehicle, or if the tax burden rises too quickly, we risk seeing hesitancy and a fall in demand. This isn’t about freezing company car tax indefinitely. BIK has already demonstrated how effectively tax policy can influence positive behaviour, but that influence works both ways.
There is a wider economic case too. Fleet vehicles are typically renewed every three to four years, creating sustained demand for new cars and a regular supply of relatively young, well-maintained vehicles into the used market. A healthy company car market therefore helps support both new vehicle registrations and EV affordability beyond the first driver.
Salary sacrifice has become an important part of that picture. Around two in five BEV drivers acquire their vehicle through salary sacrifice, opening access to BEVs across a broader range of incomes, occupations and age groups. The growing number of used vehicles in salary sacrifice makes EVs even more affordable.
“The BVRLA is proposing that EVs aged three years or more should instead be taxed on 35% of their original P11D value.”
The tax treatment of those vehicles in their second life needs attention though. Currently, BIK on a used EV continues to be calculated using the original list price, despite the vehicle being worth substantially less three years later. The BVRLA is proposing that EVs aged three years or more should instead be taxed on 35% of their original P11D value. Modelling suggests the measure could help grow the used BEV company car market to 135,000 vehicles by April 2030, compared with 60,000 without the change.
These measures sit alongside two further Budget priorities. The BVRLA wants the Government to rethink the introduction of electric Vehicle Excise Duty (eVED), which is due from 2028, and extend the 40% first-year capital allowance available to rental and leasing businesses to include electric cars. The latter would help address the mismatch between rapid EV depreciation and the tax relief currently available to the companies investing in them.
Taken together, these aren’t simply requests for favourable tax treatment. They are about creating a coherent environment in which businesses, drivers and investors in the British automotive industry can make long-term decisions.
BVRLA members and their fleet customers have already made substantial commitments in the UK’s transition to cleaner, greener vehicles. The job is far from done and the sector will need to keep up its leading role if the headline targets are to be achieved. Maintaining that investment requires policy that looks beyond the next financial year and gives businesses a long-term picture in which to plan.
The upcoming Budget provides an opportunity to give businesses and drivers that certainty, supporting demand for new EVs today while helping to build the healthy used market that will be essential to making electric motoring more affordable tomorrow.
RELATED STORIES
Major business groups unite to launch Road Pricing Coalition as fuel duty dries up
Seven leading business organisations representing key sectors of the UK economy have joined forces to launch the Road Pricing Coalition, demanding that commercial fleet operators have a decisive voice in how road use is taxed as fuel duty revenues collapse.
