Government provides ‘all-important’ clarity for fleets

By Harvey Perkins, director at HRUX

The lead-up to the Autumn Statement seemed to be surrounded with doom and gloom around the Chancellor’s plans to raise taxes and cut spending.

So, I sit here in a relatively positive mood as, with company cars, at least, the Government seems to have listened to reason and provided all-important clarity for the next five years. 

Their policy was to encourage take-up of electric vehicles (EVs), and that seems to continue for the most part. The biggest positive is company car tax rates.

These remain at current levels until April 2025 and will now only rise after that for EVs by 1% in each of the following three tax years. So, right the way through to April 2028, we know what the rate is going to be. For an EV it will max out at just 5% in 2027/28. And that, ladies and gentlemen, is what we call a result.

Prior to the Autumn Statement people were talking about rates as high as 10% and we were running ‘what-if’ models at up to 20% in five years. 

At 5% we have the lowest rates for several generations, which means an electric company car remains an incredibly tax-effective benefit.

Personally, I’d expected them to target plug-in hybrid electric vehicles (PHEVs), but these also rise by just 1% a year for the three years from April 2025.

PHEVs are still often seen as a good option for those with higher mileage and genuine charging concerns.

The rates on BEVs are significantly lower, but employees can still benefit significantly from tax and national insurance contributions (NICs) perspective through a PHEV compared with an equivalent internal combustion engine (ICE) car.

For traditional ICE vehicles the rates will rise by 1% for 2025/26, to a max of 37%, but are then fixed until April 2028. You could argue they were already as high as they could sensibly be.

Other charges, for things like for private use of vans and company car private fuel, rise only by the Consumer Price Index (CPI) – although that’s suddenly quite high.

The application of VED from April 2025 for EVs is a little bit of a blow, but no one should say they are completely surprised.

For the most part the rates will be low, but the kicker is the Expensive Car Supplement which will apply to new vehicles registered from April 2025. This is expensive and applies to cars with a list price of £40k upwards.

Lots of traditional ICE cars come in under this figure, but EVs tend to cost more (batteries are expensive), so expect lots of lobbying to raise the £40k for EVs to something more sensible.

Finally, the 100% first year allowance for electric vehicle charge points is extended to March 31, 2025, for corporation tax purposes and April 5, 2025, for income tax purposes.

Earlier on the same day we heard that HMRC had completed its annual review of AER (the electricity reimbursement rate) and increased it from 5p to 8p. This is broadly what we expected, but is also positive news.

HMRC also said it would review that value quarterly from now on – another piece of good news.

To those who argue that 8p still isn’t enough can I remind you that employers can always reimburse the actual cost of charging provided you have the data to prove it is accurate.