Future company car tax rates needed to ‘instil confidence’

The Association of Fleet Professionals is calling on the next Government to prioritise extending company car benefit in kind taxation tables.

It is now almost two years since the current benefit-in-kind (BIK) tax tables were announced and they only run until the 2027/28 tax year, meaning fleets ordering a vehicle today do not know the tax rate their drivers will be charged towards the end of the decade.

Paul Hollick, APF chair, said: “There’s been something of a structural change in recent years, with the popularity of electric company cars on fleets meaning businesses have started operating longer replacement cycles to help offset their higher purchase cost, rising from typically three years to four or five.

“This means that we need the benefit in kind tables to extend longer into the future than was previously the norm.”

One of its key demands in the trade body’s Tax and Regulation Manifesto is to see company car tax settled at least until the 2029-30 tax year.

“Clear, positive signalling is needed from the government to instil confidence for fleets buying future vehicles,” continued Hollick.

“In our view, this should be among the first fleet jobs for the incoming government, whoever that turns out to be, otherwise fleets are buying ‘blind’ without being able to tell drivers what BIK tax they will be paying in the future. That’s simply unfair.

“After a General Election, the chancellor will normally create a Budget or fiscal statement within the first couple of months, and we’d very much like to see the new tables announced at that point. It’s an easy task and would create a much higher degree of certainty.”

The AFP accepts that BIK rates on electric company cars would increase over time as they became widespread on fleets, but says it is important to maintain an incremental approach.

Hollick said: “Benefit-in-kind taxation on electric company cars has been rising at about one per cent every year and we believe that increases higher than this could easily prove counterproductive.

“While electric power has become almost the norm for many operators, it is largely the low hanging fruit that has been picked and we’re entering a more difficult phase.

“We’re now working our way through these trickier applications, notably where drivers don’t have charging available at their home or nearby, something that won’t be resolved properly until on-street charging infrastructure becomes widespread across the country.

“For these employees, low benefit in kind taxation is an important incentive to offset inconvenience.”

Hollick added that the adoption of electric vans is proving much more difficult than for cars, and zero BIK taxation for those van drivers should be maintained as long as possible, alongside continuing exemption from road tax.