On Thursday 17th of November, Jeremy Hunt, Chancellor of the Exchequer, laid out the Government’s plans to repair the economy and plot a course out of what is now considered the start of a severe recession. Many in the transport and fleet management industry, the measures contain a mix of bad and reasonably good news. The main focus for discussion has been the changes to VED for electric vehicles. Up to now, all electric vehicles will be subject to VED from 2025, potentially disincentivising drivers to purchase EVs.
What follows is a round-up of comments from industry leaders:
Matthew Walters, Head of Consultancy Services and Customer Value at LeasePlan UK, said:
On the economic situation:
“The forecasts contained in the Chancellor’s Autumn Statement only confirmed what we knew: the UK economy is already in recession and faces a couple of difficult years ahead. This will be a challenging time for businesses, families and individuals, as we all grapple with rising prices and other financial demands.
“However, the fleet industry is well placed to meet – and overcome – these challenges. Not only have we overcome similar challenges in the past, but we will also be one of the major drivers of growth in the years to come. Fleets account for thousands of jobs and enable £billions’ worth of business to happen. They are also leading the transition to newer, cleaner forms of motoring.
“This is why we are eager to work with Jeremy Hunt – now and in future. Fleets, he’ll find, are an essential part of the UK’s recovery from recession.”
“At last! We finally have the rates of Company Car Tax (CCT) for 2025-26 and beyond. Given that fleets are now entering into contracts that reach into those years, having this clarity is a welcome development.
“We note with particular interest the new rates for Electric Vehicles (EVs). They will rise slowly by 1 percentage point a year to a high of 5% in 2027-28, which is the final year for which we now have certainty. PHEVs will also see their rates increase by 1 percentage point a year.
“Happily, these are much lower numbers than some of those that were being mooted in advance of the Autumn Statement – and for that we are grateful.
“But we would question, in general, whether the Chancellor is wise to raise money by mortgaging the future. EVs are still a technology that needs supporting, rather than burdening ahead of time.”
On Vehicle Excise Duty:
“Until now, EVs have been exempt from paying VED. But that is now set to change. As of 2025, they won’t just have to pay the low first-year rate of £10 and then a standard annual rate of £16, they will also be subject to the additional rate for vehicles worth over £40,000.
“Given that EVs tend to have higher sticker prices than their fossil-fuelled counterparts, this threatens to be a hefty new tax for electric motorists. Let’s hope that manufacturers continue to drive down list prices in the coming years.
“Of course, we have concerns about what this means for the pace of electrification. But we are also concerned about what it means for the future of vehicle taxation. Is Hunt just going to keep on dragging EVs into the current tax systems and making them pay more? Or is he going to properly reform vehicle taxation, perhaps to include elements such as Road Pricing, so that it is properly fit for the 2020s and beyond?
“There has been speculation that the Treasury is working on wholesale reforms. There was even speculation that a consultation on Road Pricing would be launched today. But, once again, nothing materialised. The Chancellor should be careful: this is a problem that he cannot afford to ignore.”
On Fuel Duty:
“The Chancellor gave no word on Fuel Duty, which suggests that he’s decided to implement next March’s planned increase to the levy. This increase could include a reversal to the 5p cut that Hunt’s predecessor, Rishi Sunak, introduced earlier this year, as well as an inflationary component. Indeed, the Office for Budget Responsibility warns, in its supporting documentation, that ‘It is expected to raise the price of petrol and diesel by around 12 pence a litre’.
“Given the state of the public finances, this would be an unsurprising move from the Chancellor. However, it would also be a significant new burden on household and business budgets – and at a particularly difficult time.
On other EV-related measures:
“Although the Chancellor has imposed new and higher taxes on EVs in this Autumn Statement, he has also introduced some measures that will make the transition easier.
“One of these is the extension to 2025 of the 100% first-year allowance for companies installing charge points. But more significant by far is the confirmation that the energy price cap will be set at £3,000 a year from April 2023 to March 2024. This will help to keep the whole life costs of EVs down – and protect fleets and motorists from the worst fluctuations of the energy market.”
“However, it should be noted that AER (the rate at which companies pay company car mileage for EVs) has been increased to 8ppm from 5ppm from December, but this is not set to be reviewed again until this time next year. LeasePlan would call upon the government, again, to align the review to the AFR, which are decided upon quarterly.”
Jon Lawes, Managing Director, Novuna Vehicle Solutions: “With COP27 still fresh in the memory, Jeremy Hunt reaffirmed the UKs commitment to stick to the Glasgow pact in reducing emissions 68% by 2030, and yet delivered a setback to the electric vehicle industry by introducing Vehicle Excise Duty on electric vehicles for the first time.
“The announcement that electric vehicles will be subject to VED from 2025 has delivered a potential £165million blow to the drivers of the one million EVs currently on UK roads. Drivers should not be penalised for choosing a more environmentally friendly mode of transportation, and the Chancellor’s decision appears completely at odds with the Government’s 2030 ambitions.
“However, belated clarification that Benefit-in-kind rates will remain at a relatively low level beyond 2025 is a welcome announcement and provides much needed assurance for corporate fleets.
“It’s imperative we remove barriers to adoption, but with no new commitments to charging infrastructure announced today, the Government must urgently do more to deliver on one of its key growth priorities.”
James Warwick, tax partner at Deloitte, said: “Today the Chancellor of the exchequer announced two changes in relation to Electric Vehicles.
“From April 2025, owners of EVs will begin paying Vehicle Excise Duty (road tax) in the same way as traditional combustion engine vehicles owners do. This puts the brakes on both cost and emissions reducing incentives for EVs.
“However, the second change represented a continued commitment to encouraging EV adoption through company car schemes. Benefit in kind (BIK) rates for EVs will rise from the current rate of 2%, going up 1% per year from April 2025 to 5% by the 2027/28 tax year. Signposting the road ahead for BIK rates is particularly important for these schemes where it is common for lease commitments to extend 3-4 years ahead. Commitment to low rates for the medium-term will maintain the very strong economic incentive for employers to offer EV schemes and for employees to take them up.”
Mike Hawes, SMMT Chief Executive said, “We recognise that all vehicle owners should pay their fair share of tax, however, the measures announced today mean electric car and van buyers – and current owners – will face a significant uplift in VED. The sting in the tail is the VED supplement which will unduly penalise these new, more expensive vehicle technologies. The introduction of taxes should support road transport decarbonisation, and the delivery of net zero, rather than threaten both the new and second-hand EV markets.
“With a ZEV mandate on the way for car and van manufacturers, we need a framework that encourages consumers and businesses to buy electric vehicles. We look forward to working with government on how to transition the market and ensure the tax framework on road users supports this objective.”
Comment from Alok Dubey, UK Country Manager at Monta: “Although it’s never nice to receive more taxes, the Autumn Budget announcement on electric cars to be road taxed from 2025 was inevitable. EVs don’t live within their own bubble and obviously must pay their way, but the news represents yet another barrier of entry to the electric vehicle market and therefore counter-productive to the UK’s net zero ambitions.
“This will only put off already cash-strapped consumers from switching to an electric vehicle, and ignores other long-standing issues that continue to plague the industry. For example, EV drivers are still expected to pay 20% in VAT on all public charges, so added tax may feel like a slap in the face to those trying to make a sustainable difference.
“The UK is also far behind where it needs to be in terms of charging infrastructure, with the latest figures showing 61% of Local Authorities failing to roll out public charge points to meet the government’s target of 300,000 by 2030. It’s also not been that long since the UK government scrapped EV-related grants, and when you add in the 2030 ban on diesel and petrol vehicles, the UK’s EV strategy presents a conflicted picture.
“While investment and commitment to charging infrastructure is continuing, to keep adoption going through the challenging economic landscape of inflation and recession, the government should look at other areas that can help.
“Our recommendation is, at a minimum, to make sure that this tax is going back into areas that are known to drive EV adoption – such as key infrastructure, grants and subsidies, or investment in better technology. The additional windfall tax on energy companies should also be used to leverage more renewable energy to ensure that the electrification of transport remains cheaper than owning petrol and diesel-engined vehicles.”
Melanie Shufflebotham, COO and Co-founder, Zap-Map: “We have well over half a million electric vehicles on UK roads now. We still need to encourage lots more drivers to make the switch, but electric is fast becoming the norm and introducing road tax from 2025 is an acknowledgement of that.
“EV drivers will still save with lower costs to run and maintain their vehicles and receive tax benefits on company cars. Not to mention the vital carbon saving and clean air benefits.
“As the used market grows and prices for new vehicles drop, the value of switching to electric will be apparent to all drivers, whether they are paying road tax or not.”
James Maden, Sales & Marketing Director at Nexus Vehicle Rental. “The announcement that electric vehicles (EVs) will no longer be exempt from vehicle excise duty (VED) from 2025 is concerning for the fleet industry, but not unexpected. While we agree that electric car owners should contribute to the upkeep of our roads, there is still more that needs to be done to ensure the UK has suitable infrastructure in place for businesses that switch to electric ahead of the ban on new petrol and diesel vehicles in 2030.
“It is positive that the government is still signposting for a greener future, but it appears somewhat contradictory for the Chancellor to reiterate the Glasgow Pact commitment to cutting emissions by 2030 while simultaneously imposing taxes that may discourage businesses from upgrading their fleets to electric. Following this news and the Chancellor’s announcement that there would be no cuts to capital investment over the next two years, it is time that the Government finally comes through with its promises to improve our roads and expand access to EV charging points across the UK.”
David Bushnell, Director of Consultancy and Strategy, Fleet Operations: “The chancellor had tough decisions to make as he set about finding the public spending cuts and tax rises needed to fill the UK’s fiscal black hole.
“For the transport sector, the government’s balancing act of increasing tax revenues with its continued commitment to meeting net zero targets was always going to prove contentious.
“His Autumn Statement, however, has at least given fleet businesses and drivers clarity, along with breathing space, to plan ahead and factor tax rises for electric vehicles (EVs) into their financial forecasts and budgeting from 2025.
“It was always going to be a case of when, and not if, EVs would become subject to Vehicle Excise Duty and the year-on-year 1% increase in company car tax, for the three years from 2025, was lower than many industry analysts were expecting. Thankfully, a significant tax benefit remains for those transitioning to EVs.
“Moreover, a notable call to action to order vehicles before 2025 has also come in the shape of the Expensive Car Supplement being applied to EVs for cars listed over £40,000.
“In the face of soaring energy costs, today’s Treasury’s announcement that the advisory electricity rate will rise to 8ppm, must also be welcomed, as well as confirmation that from December 1 the AER will be reviewed quarterly in line with AFR’s. However, these rates assume all charging is done at home, rather than the reality of a mix of home, workplace and public charging. Many drivers who rely purely on using public charging infrastructure, are set to still find themselves short-changed.”
Caroline Sandall-Mansergh, Consultancy and Channels Development Manager, Alphabet GB, said: “Following Jeremy Hunt’s Autumn Budget announcement today, while it is disappointing that EVs will no longer be exempt from VED after April 2025, we are pleased to see that the increase in company car tax for EVs will be incremental at 1% per year. From the BIK increase announced today, the average electric vehicle driver on a £35,000 list price at the 20% tax rate will only be paying an extra £6 a month from April 2025. However, such a sharp increase in VED for EVs is likely to limit uptake, particularly in light of current energy prices. We would have preferred to see the introduction of a new lower rate in order to continue to differentiate zero emissions vehicles from other vehicles.
“As the government has confirmed its commitment to meeting 2030 net-zero targets, it is crucial that the UK’s transition to EVs continues at pace. The sales figures industry wide over the last year have shown a positive start towards the rate of adoption required; at Alphabet GB alone our new car order figures year-to-date for PHEVs are neck and neck with petrol vehicles, and pure electric orders have increased by 19% compared to the same point in 2021. To support this, we welcome the extension of the 100% First Year Allowance for electric vehicle chargepoints to be announced in the Spring Finance Bill 2023.
“Today’s announcement gives businesses the clarity they need to make informed and definitive plans for their ongoing fleet electrification strategies. We’ll be working closely with all our customers to help them understand what the increases in tax rates means for their business and how to navigate these changes with the very best solutions.”