Fall budget must address company car tax, industry warns Car News

Issuing tax brackets for company cars beyond April 2025 should be a priority in the fall budget to reassure businesses and drivers that EV incentives are long-term , warned the fleet sector.

Company car tax in the UK is based on a percentage of the list price of the vehicle (P11D) weighted against models with higher CO2 emissions, and this ‘taxable value’ underpins both the Benefits in Kind Tax (BIK) for drivers and Class 1A National Insurance Contributions for their employer.

These tapes are typically issued at least three years in advance, providing certainty of tax bills for the duration of a typical commercial lease.

Ultra-low bands for cars emitting less than 50g/km CO2 were introduced in April 2020 and have been frozen at 2022/23 rates until April 2025. This means EV drivers will pay a tax on 2 % of list price, compared to 25% or more for most petrol, diesel and hybrid models.

That’s a powerful incentive: Two-thirds of new electric cars were registered with fleets and businesses in 2021, according to the Society of Motor Manufacturers and Traders (SMMT).

However, with no indication of what the tax brackets will be beyond April 2025, the British Vehicle Rental and Leasing Association (BVRLA) fears companies will face uncertain tax bills for cars that will still be in the fleet after this date.

BVRLA chief executive Gerry Keaney called for any tax increases to be stable and to keep incentives for electric vehicles.

“The uncertainty caused by the lack of foresight beyond 2024/25, or a sudden increase in rates, will cause the growth of electric vehicles to slow,” he said. “This is to be addressed by the Chancellor in the budget this autumn. .

“As we weather the cost of living crisis, drivers need to know what their tax bill will be.

“The government must maintain the fragile momentum it has created in the face of current economic headwinds. Now is not the time to accelerate tax hikes.”

Companies are right to be cautious. Following the Dieselgate emissions scandal in 2015, the Treasury decided not to scrap the 3% diesel company car tax on less than six months’ notice, then raised it to 4% from of April 2018. Both rulings increased tax bills for vehicles that were already on the road.

Paul Hollick, president of the Association of Fleet Professionals (AFP), has similar concerns, especially as long delivery times for new vehicles could mean some will still be in the fleet in 2027/28.

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This notice was published: 2022-06-17 11:31:24

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