Whilst Wednesday’s Autumn Statement did not comment on the rumoured ‘pay-as-you-go’ road tax proposal or the 2035 ICE deadlines, there were several noteworthy points that will be welcomed by fleet operators and road users, along with some changes to be cautious of.
Benefit in Kind rates extended to 2030
In her speech last week, the Chancellor Rachel Reeves confirmed on-going support to incentivise the uptake of fully electric company cars and confirmed the current levels of BiK to 2028 will remain. BIK for zero emission vehicles will raise by 2% each year for the next two years to 8% by 2029/30.
Drivers of Plug in Hybrid Vehicles will incur a much higher rise in 2028/29 to 18% and 19% the following year with the specific zero emission range no longer a factor.
Reeves stated, “We want to support the uptake of electric vehicles, so I will maintain the incentives for electric vehicles in company car tax from 2028 and increase the differential between fully electric and other vehicles in the first-year rates of Vehicle Excise Duty (VED) from April 2025.”
Support for the transition to EV Van
The government also has committed to providing £120 million in 2025-26 to support the purchase of new electric vans via continuation of the plug-in vehicle grant and to support the manufacture of wheelchair accessible EVs.
Costs to Drivers: No change to fuel duty and Changes for EV VED
Contrary to expectations, the 5p cut in fuel duty has been frozen for another year, offering continued relief to drivers of ICE vehicles.
The chancellor also committed to increasing the differential between EV and other vehicles in the first rate of Vehicle Excise Duty (VED). Whilst the changes in VED are not all new, it is worth revisiting what they mean as the changes will take effect in April 2025:
Currently, drivers of electric vehicles do not pay road tax, although they must still tax the vehicle at no cost. From April, zero-emission vehicles will be liable for the lowest first-year rate of VED, currently £10 per year for vehicles. This rate will be frozen until 2029/30 however the rates for all other emission bands in 2025/26. In the second year of registration onwards, these vehicles will attract the standard rate, currently £190 per year. While the first-year fee will not be retrospectively charged to existing EV drivers, the new subsequent year costs will apply.
Tax Treatment for Double Cab Pick-Ups
A change was also announced regarding the treatment of double cab pick-ups with those with a payload of one tonne or more treated as cars for certain tax purposes. The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.
National Minimum Wage: Salary Sacrifice
The Chancellor confirmed that from next April, the National Minimum Wage (NMW) for people aged 21 or older will rise by 6.7%, from £11.44 an hour to £12.21. For those aged 18 to 20, it will increase from £8.60 to £10. National insurance rates will be held for employees but increased for employer contributions from 13.8% to 15%. The level at which Employers start to pay will also reduce from £9,100 to £5,000.
These changes will impact employers’ minimum wage compliance and they will need to ensure that salary sacrifice benefits don’t breach this new level. Car salary sacrifice remains an excellent way to reduce NI costs but some employees on lower salaries will be effected by the increase in NMW.
Road Repair Budgets and Investment in Infrastructure
The Chancellor announced an increase of £500 million in road repair funds for 2025, a move that will be welcomed by all road users. According to the AA, over 800,000 incidents in 2024 were due to pothole damage or attempts to avoid them. Improved road surfaces will lead to lower repair costs, reduced vehicle downtime, and fewer disruptions for road users.
But the investment doesn’t stop at roads. Chancellor Rachel Reeves has committed to establishing the GB Energy institution, aiming to make Britain a clean energy superpower. This includes investments in carbon capture and storage, multiple battery gigafactories, and over ten green hydrogen projects across England, Scotland, and Wales. Additionally, £2 billion has been earmarked for the automotive sector to ensure the UK remains at the forefront of electric vehicle manufacturing
In summary, the 2024 Autumn Budget brings a mix of relief and new challenges for fleet managers and road users. With significant investments in road repairs and green energy infrastructure, alongside continued incentives for electric vehicles and a freeze on fuel duty, the government aims to support both traditional and emerging automotive sectors. However, the changes BIK levels for PHEVS and the rise in the National Minimum Wage highlight the need for careful planning and compliance. Fleet operators should stay informed and proactive to navigate these updates effectively.
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