The Chancellor’s Emergency Budget has some serious implications for drivers and fleet-operating businesses. In response, Matthew Walters, Head of Consultancy Services at LeasePlan UK, has issued a statement which covers the main takeaways.
On changes to income tax and Benefit-in-Kind:
“Reducing the basic rate of income tax from 20% to 19% would have offered a welcome 5% reduction in Benefit-in-Kind for around 300,000 company car drivers from April 2023. That amounts to an annual saving of between £50 and £100 for a typical petrol, diesel or hybrid vehicle.
Image by pressfoto on Freepik
“Although small, that would have offered a useful tax cut for households who are already facing rising living costs. Especially as ongoing shortages of semiconductors and other critical components have left many of them waiting a year or more for low-CO2 electric and plug-in hybrid cars. Often while still driving a vehicle in a much higher Benefit-in-Kind band.
“The Chancellor has also signalled that changes to the 20% income tax rate will be delayed ‘indefinitely’, which follows last week’s U-turn on the 45% band. In the meantime, choosing a plug-in hybrid or electric vehicle is the most effective way for company car drivers to minimise their tax burden during a period of rising living costs. These can offer up to a 90% saving compared to a petrol, diesel or hybrid alternative.”
On changes to the Energy Price Guarantee:
“The Energy Price Guarantee had been one of the key policies announced at the start of Prime Minister Liz Truss’s premiership. Importantly, this would have fixed the cost of home electricity at 34p/kWh until October 2022 and offered some certainty for electric vehicle drivers. Despite being one of the most expensive policies confirmed during September’s Mini Budget, the cost of charging at home has almost doubled during the last 12 months and was set to rise again in January.
“By removing the cap on energy prices from April 2023, electric vehicle drivers who haven’t already fixed prices with their supplier now face uncertainty about how much it will cost to plug in at home. Wholesale gas prices are still volatile, so the Treasury-led review announced this morning must take place quickly and provide details of what replaces the Energy Price Guarantee from next April. Otherwise, it risks dissuading people from having the confidence to go electric just as the market is gathering pace.
“Businesses will also be eagerly awaiting the details of future support for energy prices. They are not protected by the Ofgem price cap and are dealing with spiralling operating costs, with limited details about how the current support system would protect them from further increases. This includes public chargepoint operators, and we have seen prices reaching £1 per kWh for some networks in recent weeks. That is a significant cost for fleets who depend on this infrastructure, but also for drivers without off-street parking.”
On the need for further action:
“The focus of this ‘Emergency Budget’ was to stabilise markets following several weeks of turbulence, so we weren’t expecting many details for fleets. However, this is the second of three fiscal events within a six-week period and does little to address some of the biggest question marks for fleet operators.
“Most importantly, HM Treasury must publish Company Car Tax bands from 2025-26 and beyond. Drivers and fleet operators taking delivery of new vehicles today have no idea what Benefit-in-Kind and National Insurance contributions they will be paying during the final years of that contract. That uncertainty has become even more problematic as drivers are often waiting more than a year for new orders to be delivered.
“Fleets will also be eagerly awaiting changes to the Advisory Electric Rate (AER) used for reimbursing the cost of charging an electric vehicle. This has been fixed at 5p per mile since November 2021, despite sizeable increases in charging costs – especially for public chargepoints – in the meantime. In many cases, this is leaving drivers out of pocket.
“The fleet sector relies on long-term certainty and the ability to make procurement decisions with confidence, and they can wait no longer. The new Chancellor has his work cut out clearing a backlog of vitally important fiscal decisions and this process must begin at the next proper Budget.”
Jai Kanwar, Co-Founder and Joint Managing Director, Zeus, said: “The market fallout from the Mini Budget and its subsequent reversal has hobbled businesses and consumers of any sense of security. Inflation and the cost of living are once again rising, adding to the anxiety over the economy and further threatening the future of our owner-operator and small haulage firms, who make up 70 per cent of UK registered haulage firms. More than ever, these businesses, which UK supply chains rely upon, face an increasingly uncertain future. Strong leadership and a clear strategy on rebuilding confidence in our economy is essential for our consumer-driven economy to restart.
“In addition to reigniting economic growth, this Government should look to longer-term solutions for making our supply chains truly sustainable. For the road freight industry, energy reform and embracing more sustainable freight fuels such as hydrogen and electric vehicles would be a great first step. Much of this current crisis can be traced back to our dependence on imported fuels, which leaves our economy open and vulnerable to geopolitical instability in other regions of the world. Investment is desperately needed in domestically produced, sustainable and cleaner energy sources, which can then power electric goods vehicles. This action would help provide the longer-term stability we need by keeping the flow of goods, raw materials and produce on the move. We hope this is something the Chancellor plans to address in the Autumn Budget later this month.”
