Fleet industry reacts to Autumn Budget

The fleet industry has welcomed the freeze in fuel duty but fears the impact that the hike in national insurance will have on business.

In one of the biggest tax raising Budgets ever seen, the Chancellor, Rachel Reeves, made a series of announcements, including publishing company car tax rates from 2028 to 2030.  

Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said: “This was a complex budget at a difficult time. The increase to employers’ national insurance will have a substantial impact on businesses and their customers. The full scale of its impact will only be seen in time.

“For our sector, the Chancellor has left many challenges unresolved. As penalties to stay in ICE vehicles ramp up in line with the ZEV mandate, more needs to be done. 

“The barriers relating to the rental sector, charging infrastructure, consumer education and the used EV market, all need close attention.

“The Budget did bring some green shoots of positivity, suggesting that the government is taking the UK’s transition to cleaner, greener vehicles seriously. 

“The confirmation that the fair EV company car tax regime will be continued at least to 2030 is a positive step, supporting a vital contributor to the transition and a bright spot of success up to now. Extending the Plug-in Van Grant provides the sector with a much-needed boost.”

Mike Hawes, chief Executive of the Society of Motor Manufacturers and Traders (SMMT), says that the Chancellor is right to set out measures to address the deficit while investing for future growth. 

“The automotive industry is a growth-driving sector, fundamental to the delivery of the country’s net zero ambitions,” he continued. 

“We therefore welcome today’s commitment of £2 billion of automotive transformation funding as part of the government’s modern Industrial Strategy.

“Delivering that strategy depends on the UK being globally competitive. Additional national insurance contributions will put massive pressure on the automotive supply chain which is predominantly SMEs.

“Next year’s spending review must find resources to fund measures that alleviate the strain on these companies and help them transition to an electrified future.

“A strong manufacturing sector depends on a strong market. The lack of substantive measures to support the new car market – in particular for electrified vehicles – is hugely disappointing. 

“We welcome the extension of the Plug-in Van Grant and company car tax benefits, but these alone cannot drive the growth in demand needed. 

“With the sector challenged to deliver the world’s most ambitious EV transition targets, achievement of those targets is in serious doubt. There must be an urgent review of the market and regulation, else the cost will soon be felt in reduced UK investment, economic growth and jobs.”  

The extension of the Plug-In Van Grant was a key ask with the Zero Emission Van Plan. A spokesperson for the Zero Emission Van Plan, said: “The extension of the Plug-in Van Grant provides welcome relief to a sector facing an uphill battle to meet ambitious decarbonisation targets. 

“Many van operators are seeking to kickstart their transition to zero-emission vehicles, with cost just one of the key barriers blocking their path.

“Extending the grant is a positive step but will not supercharge the transition by itself.” 

Matthew Walters, UK head of consultancy services and customer value at Ayvens, says that the Chancellor addressed two loopholes in the current company car tax system. 

“Future legislation will end ‘contrived’ employee car ownership schemes from April 2026, while double-cab pickup trucks will be treated as passenger cars and taxed based on their CO2 emissions from next April,” he said.  

Reforms to employer NICs weren’t directly aimed at fleets, but it will affect company car and salary sacrifice schemes, explains Walters.

“Employer NICs will rise from 13.8% to 15.0% from April 2025, while the income threshold will be reduced from £9,100 to £5,000 per year,” he said. 

“The rate change also applies to Class 1A rates for providing workplace benefits – such as a company car. 

“The changes mean employers’ annual Class 1A NIC bills will rise by 8.7% next year, adding £144 for £40,000 hybrid company car, or £16 for an electric vehicle at the same price, while potentially making salary sacrifice schemes more attractive. 

“Salary sacrifice enables drivers to lease vehicles through their employer and pay for them with their pre-tax income. As long as that vehicle emits 75g/km CO2 or less (which is true of most plug-in hybrid or electric cars), income tax and NICs are calculated the remaining salary and the taxable value of the car. 

“With company car tax bands as low as 2% for electric vehicles, this already typically offers a reduced NIC bill for employers, and that advantage will grow as those contributions cover a larger share of their salary. 

“It’s bolstering the business case for what’s already one of the most affordable ways for drivers to opt into a new electric car – and business uptake is growing. 

“The Chancellor should be wary of anything that slows that trend.” 

Ian Hughes, CEO of Zenith’s corporate and consumer divisions, believes that the Chancellor’s first budget shows the Government’s commitment to transitioning to electric vehicles (EVs), by providing long term clarity on benefit-in-kind (BIK) tax rates for an additional two years, and a £120 million investment for the next year to support the purchase of new electric vans via the plug-in vehicle grant.

“We were particularly pleased that Labour has recognised the need to review the upcoming expensive car supplement, which disproportionately impacts zero emission vehicles - something we have discussed directly with Treasury,” said Hughes. 

“However, while there was positive intent, to ensure everyone has access to zero emission vehicles we need more support to stimulate the used EV market. This is another black hole which the Government needs to fill.”

David Bushnell, director of consultancy and strategy for Fleet Operations, says that the Budget offers a “mix of challenges and opportunities” for the fleet industry, combining increased payroll costs with crucial support measures for transport and sustainability. 

“Fleet Operations welcomes the Government’s decision to freeze fuel duty, increased funding for road maintenance, and the extending of EV incentives, but notes the added pressures on employers following rises in both employer national insurance contributions and the national minimum wage.

“Whilst the Chancellor announced a further £500m would be made available for the repair of potholes, it’s a step in the right direction but it still doesn’t go far enough.

“Fuel duty will not now be increased until April 2026, and the rise in BIK rates was much lower than anticipated, rising by just 2% from April 2028 to 7% and then 9% for zero emission cars.

“However, for drivers selecting PHEV’s between 1 & 50g/km, there are significant increases to 18% and then 19% signalling that a move to zero emission cars should not be delayed.

“For businesses, the extension of EV incentives in company car tax beyond 2028, along with a favourable Vehicle Excise Duty differential for fully electric vehicles from April 2025, signals the new Government’s support for sustainable transport. 

“These measures provide a clear financial advantage for companies looking to transition their fleets as well as providing long term confidence when introducing a salary sacrifice scheme - moving company car and employees towards greener options, making it more feasible to align with environmental goals while reducing long-term tax liabilities.” 

He added: “While businesses will face increased expenses, they can also benefit from stable fuel costs and improved infrastructure through road maintenance improvements. Further good news is that salary sacrifice schemes remain an attractive and viable proposition.”

Paul Lippitt, senior fleet consultant at Volkswagen Financial Services (VWFS) Fleet, welcomed the “much-needed clarity” for fleets with the publishing of company car tax rates. 

“This enables fleet operators to accurately calculate wholelife costs across new four-year lease cycles,” he said. “While the new rates are set to increase further for electric vehicles, they remain significantly below the rates for petrol and diesel vehicles, and so still incentivise the transition to electric.

“Additionally, recognising that PHEVs are often driven in petrol mode which minimises their reduction of carbon emissions versus their petrol or diesel counterparts, the Government has also announced further increases in BIK for these vehicles.”

Lippitt says that employers’ NIC increase was expected, but the increase to 15% was slightly higher than predicted by the industry.

“This will increase both salary costs and whole life costs of company cars for employers, with the estimated annual impact for a fleet of 100 petrol or diesel vehicles sitting at £16,800,” he said. “However, this increase is significantly less for BEVs, due to their lower BIK rate.

“The change is likely to drive continued interest in salary sacrifice schemes.”

Jon Lawes, managing director at Novuna Vehicle Solutions, told Fleet News: “Although the £2bn funding for the automotive sector to support the transition to electric vehicles coupled with a commitment to move the needle on green hydrogen are welcome developments on the roadmap to zero emission mobility, incentives for personal use drivers beyond fleets to make the switch needed to go much further.”   

Philip Nothard, insight director at Cox Automotive, says that the decision on fuel duty is good news for the everyday driver, however, the same cannot be said for automotive businesses across the country. 

“The raft of changes to national insurance, business rates, capital gains and minimum wage will have a significant impact on the ecosystem, which is already under continual financial pressure,” he explained. 

“On a positive note, we welcome the government’s £2bn investment into the sector, which will bring necessary support to tackle some the major challenges it faces today.”

David Wells, chief executive of trade association Logistics UK, also welcomed the freeze in fuel duty. “Nothing moves without logistics: the sector supplies our hospitals, schools, factories, shops and homes with everything they need, everywhere, every day,” he said.

“The sector is vital to any plans to stimulate growth across the economy, and this respite is welcome news for a sector already seeing increasing business failures over the last year.

“The sector operates on very narrow margins – often only 2.5% - with fuel representing a large proportion of the weekly operating cost for hauliers.” 

Richard Smith, managing director of the Road Haulage Association (RHA), added: “Transport operators are essential to economic growth; with operating costs increasing and margins tightening, the last thing these vital businesses needed was a rise in fuel duty. We are pleased the Chancellor has listened to the concerns of our members.”

On roads investment, Smith added: “The continuation of work on major strategic roads – the A47, A57 and A75 – is welcome, but we are concerned about delays and cancellations to other significant road projects such as the Lower Thames Crossing and the A303 Stonehenge tunnel. 

“Economic growth will only be achieved with investment in the infrastructure to support it. Whilst we await the announcement of RIS3, we urge the Government to ensure that it backs new projects that eliminate congestion, connect the country, and unlock economic growth.”

Barney Goffer, UK product manager at Teletrac Navman, says that the Government was very clear that this was going to be a tough Budget.

“While the frozen fuel duty is a pleasant surprise, the new regulations around national insurance contributions are going to be a challenge for many fleets,” he said. 

“Kickstarting economic growth relies on multiple sectors operating efficiently and cost-effectively – the transport sector being a major factor in this. 

“While the decision for employers to pay NIC on anything over £5,000 when previously it was £9,100 could help raise a large amount, it means increased pressure for fleets, especially the transport sector which is already running on low margins to absorb.

“The obvious thing to do would be to pass the rise in tax onto the customer but in a highly competitive transport sector there’s always someone willing to run at even lower margins.”

Matthew Briggs, CEO at business fuel card provider Right Fuel Card Edenred, added: “We welcome the announcement of a continued fuel duty freeze and an extension of the 5-pence-per-litre price cut. Whilst, positively for consumers, fuel prices are on a downward trajectory, there is still work to be done to support those struggling to cover costs. 

“Whilst wholesale fuel prices are out of the Government’s hands, we’re hopeful that prices continue to fall for the rest of the year and beyond, as this would benefit both customers and businesses.”

Jon Dye, director of underwriting for motor at QBE Insurance, says that, while the transition to EVs is being incentivised and investments in EV charging infrastructure, there are many unique challenges faced by fleet operators. 

“Vehicle availability, range limitations and lengthy recharging times—makes a full and immediate transition to EVs more difficult for some,” he said.  

“Stable fuel costs provide fleet operators with more financial predictability but I worry a hike to national insurance will pose a new challenge for many businesses. 

“Continuing the freeze in the Autumn Budget is important as the commercial motor sector faces increased risks during the winter months. 

“Overall, we hope fleet operators including haulage businesses can still prioritise safety and sustainability investments.”

The Institute of the Motor Industry (IMI) was disappointed by increase in employer NI contributions from April 2025, combined with a reduction in the secondary threshold to £5,000 pa. 

“These changes are likely to have a significant impact on costs for small businesses that operate in the automotive sector, which is already facing a skills gap of 20,000+ vacancies,” it said.

“These additional costs are likely to dampen investment in training and continuous professional development and impact the ability of the sector to be ready to support the Government’s decarbonisation targets.”

Thom Groot, CEO of The Electric Car Scheme, believes that ignoring fuel tax in the Budget is a “huge mistake”. 

“We are 14 years overdue for a fuel tax increase, and the subsidising of fossil fuels needs to end if we are to reach our net zero and ZEV targets,” he said. 

“The £100bn this freeze has cost the treasury so far, invested properly, could have been transformative to the NHS, infrastructure or just the national debt and there is no excuse for extending it. 

“This money could be far better spent on levelling the playing field for EV drivers charging in public by cutting VAT to 5%, which would cost just £14m. 

“The £20bn black hole that has dominated headlines cannot be filled at the cost of the net zero transition, it would be madness to do so.”

However, Paul Holland, managing director for UK/ANZ Fleet at Corpay, including UK brand, Allstar, welcomed the freeze in fuel duty.

“At a time when the economy is recovering, but not fully recovered, this is critical,” he said. 

“Transport and logistics are at the heart of the country’s economy and when the companies that either enable or drive logistics are battered by increasing prices and have to reduce their services, everyone suffers. 

“Let’s hope that this statement marks a change in tide for drivers, electric vehicle adoption and fleets."

Mike Nakrani, CEO Vev, said: “Continued support is critical to achieve the necessary electrification transition in our country. 

“Fleets are leading the way in the shift to EVs, and the zero-emission vehicle mandate will help drive this transition, but carrots are needed with the sticks in the shape of infrastructure funding and incentives. 

“With 10% of the UK’s total carbon emissions coming from fleets, the sector represents a major win in the quest for net zero. 

“By supporting the implementation and maintenance of electric fleet operations, the Government can accelerate our progress towards the nation’s sustainability objectives.”

He continued: “Private- and public-sector fleets need funding to help their transitions. We’ve seen the positive effect that ZEBRA funding has brought to the bus sector, and the new increased fare price cap is an important step to enabling profitable bus operations, and helping the shift to electric fleets. Other vehicle categories also need bespoke funding to create the momentum and attract additional private investment.

“Further funding support with the upfront cost of vehicle purchase and charging infrastructure will help fleets accelerate their transition to electric vehicles.”

Bryn Brooker, head of road safety at Nextbase, believes that the new Government has failed to get serious about Britain's crumbling roads. 

“The £500mn allocated for repairs won't do anywhere near enough - experts say we need £16.3 billion just to clear the current backlog,” he said. 

“Our roads have become so dangerous that drivers are forced to swerve around potholes, creating additional hazards for everyone.”

“This chronic underinvestment is contributing directly to Britain's car insurance crisis, with premiums now 58% higher than they were just a year ago, as vehicles suffer increasingly expensive damage from poor road conditions. Something has to change.

“Potholes are damaging cars and people are potentially driving unsafe vehicles with cracked alloy wheels, bent steering, and broken shock absorbers. 

“If drivers hit big potholes it's crucial to ensure the car is safe, if something doesn’t feel right make sure you stop and get it checked over.”

Lee O'Connell, sales director at Sogo, welcomed the commitment to maintaining incentives for electric vehicles, particularly in company car tax until 2028. 

“Increasing the differential for fully electric vehicles within Vehicle Excise Duty is a step in the right direction,” he added. 

“However, the question remains: do these measures go far enough to drive the level of investment necessary to meet our net-zero targets? We must consider if more robust action is required to support a rapid and sustainable transition to a net zero.”

John Wilmot, CEO of car leasing comparison site LeaseLoco, said: “The Chancellor’s decision to maintain incentives for EVs in company car tax from 2028 is a positive step for businesses.

“But while company car drivers benefit from reduced costs, everyday consumers are left without the same level of encouragement to buy EVs. 

“If the goal is to accelerate the adoption of electric vehicles and meet environmental targets, it’s essential to extend these incentives to the wider public.”

Mark Tongue, joint CEO and founder of UK vehicle lease firm Select Car Leasing, added: “We also welcome the Chancellor’s decision to maintain the existing incentives for electric vehicles when it comes to company car tax from 2028.”

Vicky Read, CEO of ChargeUK said: “While frustrating that the £950m Rapid Charging Fund (RCF) was not reconfirmed, we welcome the announcement of £200m of public funding for charge points, which we understand is in addition to the existing Local EV Infrastructure Fund. 

“We look forward to discussing how to maximise the impact of that funding with the Government in due course.

"However, to really supercharge the UK’s transition to EVs and unlock its full economic potential, the Government needs to shore up the £6bn of private investment in charging and ensure that the switch to EVs is affordable for drivers. 

“Although the Government turned down the chance to equalise VAT on public and home charging, continued support for the EV salary sacrifice scheme and more favourable Vehicle Excise Duty rates for fully electric vehicles are welcome. 

“The Government must now give the charging sector the certainty it needs by confirming that strong ZEV sales trajectories sit at the heart of its decarbonisation agenda.”