ANALYSIS
Make a statement
The recent Autumn Statement saw the Chancellor set out plans to “rebuild our economy”. Natalie Middleton reports on how it affects fleets with electric vehicles
In his first Autumn Statement as Chancellor, Jeremy Hunt announced plans to tackle the cost-of-living crisis and rebuild our economy, focused on “stability, growth and public services”. Admitting the UK “is now in a recession” during his speech, Hunt said the £55bn package of tax rises and spending outlined in the Budget would help inflation drop “sharply” from 9.1% this year to 7.4% in 2023.
When it came to fleet-specific announcements, electric vehicles were front and centre:
EV company car tax to increase 1% from 2025
The Government is to start raising company car tax rates for electric vehicles from 2025, but with yearly increases capped at 1% until 2028 to keep rates low. The changes set out that electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre will increase by 1 percentage point in 2025/26; a further 1% in 2026/7 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.
Meanwhile, the appropriate percentages for rates for all other vehicle 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. Paul Hollick, chair at the Association of Fleet Professionals, said that the announcement on the EV BiK rates going forwards was the “biggest win from the news”.
“We’ve been campaigning, along with the BVRLA and other industry bodies, to ask government to both limit any rise in benefit in kind for EVs and to provide longer-term certainty that would allow fleets to plan for the future,” added Hollick. “Here, we feel as though we have been listened to, and that well-judged measures have been put in place that will enable fleets to continue to plan for electrification through to near the end of the decade.”
For a different industry perspective, Matthew Walters, head of consultancy services and customer value at LeasePlan UK, commented: “At last! We finally have the rates of Company Car Tax (CCT) for 2025/26 and beyond. Given that fleets are now entering into contracts that reach into those years, having this clarity is a welcome development.
“We note with particular interest the new rates for electric vehicles,” he added. “They will rise slowly by one percentage point a year to a high of 5% in 2027/28, which is the final year for which we now have certainty. PHEVs will also see their rates increase by one percentage point a year.
“Happily, these are much lower numbers than some of those that were being mooted in advance of the Autumn Statement – and for that we are grateful. But we would question, in general, whether the Chancellor is wise to raise money by mortgaging the future. EVs are still a technology that needs supporting, rather than burdening ahead of time.”
1%
The Government is to start raising company car tax rates for electric vehicles from 2025, but with yearly increases capped at 1% until 2028 to keep rates low.
“We note with particular interest the new rates for electric vehicles.
“Happily, these are much lower numbers than some of those that were being mooted in advance of the Autumn Statement – and for that we are grateful. But we would question, in general, whether the Chancellor is wise to raise money by mortgaging the future. EVs are still a technology that needs supporting, rather than burdening ahead of time.”
Matthew Walters, head of consultancy services and customer value, LeasePlan UK
Electric cars and vans to pay vehicle tax from 2025
Meanwhile, the Statement also included the news that electric vehicles will no longer be exempt from Vehicle Excise Duty from April 2025 in a move to make the motoring tax system “fairer”.
The measure (see here for more details), which will be legislated for in the Autumn Finance Bill 2022, will affect both new and existing electric cars and vans.
AFP's Hollick believed this was the biggest disappointment of the Autumn Statement. “This is still some time away and probably the strategic thinking is that there will be market equity between EV and ICE by that point,” he reasoned. “But if we have learnt anything from the last few years, it is that predicting the shape of the new vehicle market is very difficult and this could yet prove to be a move that ultimately slows EV adoption by both new and used buyers.
“Of course, bearing in mind the £40,000 expensive car supplement in VED, this could be part of a government strategy to try to make EVs more accessible, with manufacturers being effectively encouraged to keep prices below this level, especially in the light of recent price escalation following the pandemic.”
LeasePlan’s Walters said he had concerns about what the announcement would mean for pace of change to electrification. “We are also concerned about what it means for the future of vehicle taxation,” he added. “Is Hunt just going to keep on dragging EVs into the current tax systems and making them pay more? Or is he going to properly reform vehicle taxation, perhaps to include elements such as Road Pricing, so that it is properly fit for the 2020s and beyond?
“There has been speculation that the Treasury is working on wholesale reforms,” added Walters. “There was even speculation that a consultation on Road Pricing would be launched today. But, once again, nothing materialised. The Chancellor should be careful: this is a problem that he cannot afford to ignore.”
Paul Hollick
Chair at the Association of Fleet Professionals
In other EV-related measures
Although the Chancellor imposed new and higher taxes on EVs in this Autumn Statement, he also introduced some measures that will make the transition easier. This includes the extension to 2025 of the 100% first-year allowance for companies installing charge points.
Also significant is the confirmation that the energy price cap will be set at £3,000 a year from April 2023 to March 2024. LeasePlan’s Matthew Walters added: “This will help to keep the whole-life costs of EVs down – and protect fleets and motorists from the worst fluctuations of the energy market.
“However, it should be noted that the AER (Advisory Electric Rate at which companies pay company car mileage for EVs) has been increased to 8ppm from 5ppm from December 2022 and the Government have aligned the review of the rate to the AFR (Advisory Fuel Rate for petrol and diesel), which are decided upon quarterly.”
