Yesterday’s Budget has left the transport and vehicle industry underwhelmed. For many commentators in the industry, the overall impression is one of missed opportunities, lack of ambition and instability in long term decision making. The freeze on Fuel Duty, while welcomed, did not come as any great surprise, however, many commentators regretted the opportunity to reduce VAT on public charging to match home charging.
Taken as a whole, this year’s Budget didn’t advance along the road to Net Zero very far.
Matthew Walters, Head of Consultancy Services and Customer Value at ALD Automotive | LeasePlan UK: “With an election looming, the Chancellor would probably have wanted to approach the Budget with more financial headroom for tax cuts. Instead, today’s announcements have had to consider a weak economy and a cautious approach to measures which could potentially fuel inflation by encouraging people to spend money. At 4.2%, inflation remains stubbornly higher than the government’s 2% target.
Although we were not expecting sweeping changes, the Budget confirmed several important policies for fleets:
- Capital Allowances for Vans
Full expensing rules were permanent during the Autumn Statement, enabling businesses to invest in equipment and plants and write off 100% of the cost against their taxable profits.
We are delighted that the Chancellor has listened to calls from the industry, announcing a consultation which will extend this scheme to include vans bought for leasing “when fiscal conditions allow”. This is an important measure to promote investment, and we are eagerly awaiting further details in the forthcoming draft legislation.
- Fuel Duty and Charging
Extending the 5p per litre fuel duty reduction for another 12 months was no great surprise. It’s an important measure for controlling inflation and has provided valuable breathing space for households and businesses since it was introduced two years ago. It’s claimed this will save motorists around £50 in the next financial year.
However, with energy costs soaring in the meantime, it has also narrowed the business case for switching to electric vehicles – and this was not addressed during the budget. Reducing VAT on public charging, from 20% to 5%, aligning it with plugging in at home, would have been useful. Especially for drivers without off-street parking and fleets who rely on mid-shift top-ups.
- 2% National Insurance Cut
With household finances under continued pressure, we welcome any policy changes which lighten the financial burden on consumers. Reducing Class 1 National Insurance Contributions (NICs) – paid on income – by 2% points will help employed and self-employed workers keep more of what they’ve earned.
Although it’s true that NIC reforms will reduce the advantages of opting into salary sacrifice schemes, the effects are marginal. These schemes enable employees to lease a new car through their employer, fund it with their pre-tax income, then pay tax and National Insurance on the remainder, typically reducing their tax bill.
Cutting NICs on income marginally reduces those savings, but the bigger picture is it will leave drivers with more money in their pockets in the first place. With retail demand for new cars waning, that’s good news.
- A need for stability
Fleets operate the newest cars and vans on our roads. They are facing new technology first and rely on stable fiscal policy to make investments new vehicles with confidence. Changing the 2030 phase-out date for non-hybrid cars, and the more recent U-turn on double-cab pickup trucks, undermine trust in the government’s ability to make long-term decisions. Giving businesses time to adjust to new policies is really important during a period of unprecedented technological change.
We would have welcomed additional measures to support fleets:
Vehicle Excise Duty reforms:
Although it was inevitable that electric cars would pay vehicle excise duty (‘road tax’) eventually, the blanket approach announced in the 2022 Autumn Statement introduces unnecessary penalties compared to some petrol and diesel models.
From April 2025, VED rates will be equalised across all cars, while new registrations priced over £40,000 will also qualify for the expensive car supplement – a £410 charge, applied to the first five annual renewals. In some cases, this will mean drivers are paying three times more tax than they would for an equivalent petrol or diesel car, adding over £1,000 to a three-year lease contract. It sends mixed messages to drivers at a time when the government is trying to encourage them to switch to battery power.
Company Car Tax Bands:
Publishing company car tax bands beyond April 2028 is already important. Businesses are still enduring extended delivery times for new vehicles, and longer lifespans are increasingly common. Some fleets will already have cars on order that will still be on the road after the current tax bands expire.
Electric Vehicle Incentives:
Despite repeated calls from the automotive sector, the Budget did not include a 50% reduction in VAT for electric cars. This would have taken thousands off the purchase price and made electrification more accessible for businesses and especially for households.
Fleets would also have welcomed an extension to the Plug-in Van Grant. This is currently scheduled to end on 31 March 2025, which risks creating a cliff-edge for orders.”
Adam Hall, Director at Drax Electric Vehicles also welcomed the Fuel Duty freeze and went on to say: “While investment packages in cutting-edge technology and manufacturing is valuable, there must be greater emphasis and understanding of the challenges that EV drivers and fleets currently face. With the launch of the Zero Emissions Van Plan, presented to MPs last week, many would’ve expected further measures to be set that acknowledged electric van concerns. To futureproof the EV transition for commercial vehicles, the government should consider the removal of regulatory barriers for the largest electric vans and a review of public charging accessibility for vans using the Public Charge Point Regulations 2023.
“Accessible and convenient charging infrastructure in the right areas is also essential. In the past 12 months, over 18,000 chargepoints have been added to the UK network, but how many are in pockets of the country that don’t currently have easy access? It’s crucial for fleets/drivers that these areas see an increase in charge point coverage to ensure safe and confident driving across the country. “
Adam went onto say: “Addressing the need to upskill UK technicians for the future of electric vehicles is now a need, rather than a desire. The uncertainty surrounding repair, maintenance, and servicing costs is a major concern hindering businesses’/drivers’ switch to EVs. By 2030, it’s projected that the UK industry will face a shortage of 25,100 EV-trained TechSafe technicians, posing risks to the safety, mobility, and achievement of net-zero targets.
“Numerous barriers exist to upskilling technicians, including recruitment difficulties, limited confidence in the plans for EV integration, and the necessity for additional support with apprenticeships. Given these challenges, the Budget presented an opportunity to introduce impactful solutions. So, it’s discouraging to hear the Budget hasn’t addressed these issues.
“While the current government support towards the future of EVs is valued, we need further policies that support green career apprenticeships. With an anticipated 8-11 million EVs on the road by 2030, it’s imperative we ensure a healthy number of skilled workers that meet demand and provide stability in the industry.”
A spokesperson for the Zero Emission Van Plan, said: “The Chancellor is ignoring the fact that the van sector needs urgent support to adopt zero-emission vehicles. Vans account for about a fifth of the miles driven in the UK every year, the vast majority of which are driven by polluting models. While there were some positive moves to support van operators today, the van sector remains behind on decarbonisation.
“Cost is a major barrier to adoption. The discrepancy between affordability of EVs vs diesel equivalents is prohibitive. The Zero Emission Van Plan is clear in how that gap can be closed. Today, the Chancellor missed a golden opportunity to act. Increased fiscal support via extending the Plug-in Van Grant, or introducing new measures, are essential. We will continue to push for such changes until tangible progress is made.”
The full Zero Emission Van Plan can be viewed online now: https://www.bvrla.co.uk/industry-campaigns/decarbonisation/van-plan.html
BVRLA Chief Executive, Gerry Keaney, said: “Today’s commitment to extend full expensing to the rental and leasing sectors is a monumental step forward to rectify an historic injustice. The BVRLA has been an active voice in achieving this change and welcomes the opportunity to engage further in delivering this long overdue alignment in tax policy.”
Today’s Spring Budget, however, contained no updates on the key levers that are integral to enabling the switch to zero-emission vehicles in line with government targets.
“At a critical time for the transition to zero-emission vehicles, no news is bad news. Today we heard nothing on charging, VED, Benefit in Kind, VAT on public charging, grants for electric vans, or a consumer education campaign. The Chancellor is leaving our sector in limbo.
“The Government needs to be braver in unlocking the billions of pounds in zero emission investments required across the whole road transport sector, from fleets, small businesses and private motorists.’
Barney Goffer, UK Product Manager at Teletrac Navman UK: “While the chancellor promised ‘more investment, more growth and better taxes’, the Spring budget is missing some vital elements for fleets despite a welcome freeze to fuel duty for another 12 months.
“The Spring Budget could have been more focused on helping work towards the bigger decarbonisation story and its associated costs.
“It would have been good to see more incentives introduced for medium to large fleets, to help them scale up their transition and reach their targets quicker. Switching vehicles and installing on-site charging infrastructure are big investments and without government incentives to help scale them up, businesses are likely to struggle to make the switch.”
David Bushnell, Director of Consultancy and Strategy, Fleet Operations: “In the midst of a pivotal election year, the unveiling of the UK Chancellor’s Spring Budget has inevitably garnered widespread attention, not least from the fleet transport sector.
“The decision to cancel the planned increase in fuel duty, effectively freezing it at its current rate, must be welcomed.
“However, whilst there will be no additional fuel cost burden for operators of petrol and diesel vehicle fleets in the short term, it is important to highlight that while this measure aids financial planning, it does little to advance the broader objective of transitioning to more sustainable modes of transport.
“The long overdue promise of making full expensing apply to leased assets will help support investment into low and zero emission commercial vehicles, but the government has missed a crucial opportunity to encourage electric vehicle (EV) adoption, especially electric vans, by failing to reduce the VAT rate on public charging.
“The cost of running EV fleets, particularly those that rely on public charging stations, remains a significant barrier to adoption. A reduction in VAT on public charging could have served as a strong incentive for fleet operators to accelerate their shift to electrification, aligning with the UK’s ambitious environmental targets.
“The transition to electric vehicles is a critical component of our collective efforts to combat climate change and reduce air pollution. It is essential that policy measures, including fiscal incentives, align with these objectives to encourage a faster and more economically feasible shift towards greener alternatives.”
