In recent years, the UK Government has offered various incentives to encourage the adoption of ultra-low emissions vehicles (ULEVs).
Just yesterday, we received the first Budget from the newly elected Labour Government. Chancellor Rachel Reeves committed to ensuring that from 2035 all new cars and vans sold in the UK will be zero-emission.
Below is a summary of new and ongoing incentives aimed at assisting businesses in transitioning to electric cars and vans, and upcoming changes highlighted within the Autumn Budget 2024.
Benefit-in-Kind Rates (Company Car Tax)
For all company cars registered on or after 6th April 2020, the BiK rate remains at 2% for the duration of this tax year. From 2025, this rate will increase by 1% annually until 2028.
In the Autumn Budget, the Government has established Company Car Tax rates for 2028-2029 and 2029-2030, which will rise by 2 percentage points each year, reaching 9% by 2029-2030.
| CO2 Emissions (g/km) |
Appropriate Percentage | |||||
|---|---|---|---|---|---|---|
| Tax Year | ||||||
| 2022-25 | 2025-26 | 2026-27 | 2027-28 | 2028-29 | 2029-30 | |
| 0 | 2% | 3% | 4% | 5% | 7% | 9% |
The Budget also confirms Benefit-in-Kind Rates for cars emitting CO2:
- For cars emitting 1-50g CO2 per kilometer, including hybrids, rates will rise to 18% in 2028-29 and 19% in 2029-30.
- For all other vehicle bands, rates will increase by 1 percentage point annually in 2028-29 and 2029-30, with the maximum AP also rising by 1 percentage point each year to 38% for 2028-2029 and 39% for 2029-2030.
For a complete breakdown of BiK rates by year, refer to our BiK rate table.
Find out how these rates will impact you or your employees by clicking here.
100% First Year Writedown Allowance (Coporation Tax Relief)
With company cars, there are special rules dictating the amount of capital allowance that can be offset against profits each tax year depending on the CO2 emissions (g/km) of the vehicle. As electric cars emit no CO2 emissions the full capital expenditure, even if purchased via Contract Purchase, Lease Purchase or Hire Purchase, can be declared in the first year.
Until April 2025, a business that purchases a van with zero CO₂ emissions is eligible for a 100% First-Year Allowance (FYA) provided the business does not claim the government’s Plug-In Van Grant (PIVG).
In the Autumn Budget, the Government extends the 100% First Year Allowances (FYA) for qualifying expenditure on zero-emission cars and for electric vehicle chargepoints until 31 March 2026 for corporation tax and 5 April 2026 for income tax.
Van Benefit Charge
Unlike company cars taxed based on value and CO2 emissions, if a van is used for both business and personal purposes, the employee's tax is determined by the Van Benefit Charge.Since 6th April 2021, there has been a zero van benefit charge for electric vans.
This budget confirms that the Van Benefit Charge will be adjusted from 6 April 2025.
Vehicle Excise Duty
Vehicle Excise Duty (VED), also known as Road Tax, is determined by the CO2 emissions (g/km) of the vehicle. Electric vehicles (EVs), which produce no emissions, are currently exempt from the first-year rate, standard rate, and premium rate.
In the Autumn Buget The government will confirms the VED First Year Rates for new cars registered on or after 1 April 2025:
- Zero-emission cars will incur the lowest first-year rate at £10 until 2029-30.
- Rates for cars emitting 1-50g/km of CO2, including hybrids, will increase to £110 for 2025-26.
- Rates for cars emitting 51-75g/km of CO2, including hybrids, will increase to £130 for 2025-26.
- All other rates for cars emitting 76g/km of CO2 and above will double from their current level for 2025-26
These changes will take effect from 1 April 2025.
The Plug in Vehicle Grant
The Government's Plug-in Vehicle Grant (PiVG) has been extended until 2025-2026.
Providing a discount of 35% of the purchase price of a van, up to a maximum of £2,500 for small vans and £5,000 for large vans. Eligible vans are vehicles that have CO2 emissions of less than 50g/km and can travel at least 96km (60 miles) without any emissions at all. Small vans are defined as having a Gross Vehicle Weight (GVW) of less than 2,500 kilograms (kg), whereas large vans as defined as those between 2,500kg and 3,500kg.
Double Cab Pick-Ups
The Budget document clarifies that the Government will classify double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for specific tax purposes.
From 1 April 2025 for Corporation Tax and 6 April 2025 for income tax, DCPUs will be treated as cars concerning capital allowances, benefits in kind, and certain deductions from business profits. Existing capital allowances will apply for those who purchase DCPUs before April 2025.
Charging Infrastructure
This budget highlights the Goverments is investing over £200 million in 2025-26 to expedite the rollout of EV chargepoints, including funding to help local authorities install on-street chargepoints across England.
Fuel Duty Rates
This Budget extends the temporary 5p cut in fuel duty rates by 12 months, now set to expire on 22 March 2026. The planned inflation increase for 2025-2026 will also not take place.
Fuel Benefit Charge
HMRC does not classify electricity as a fuel, meaning charging electric cars and vans does not incur any benefit-in-kind (BiK) payments. Employers providing charging facilities for employees with electric or plug-in hybrid vehicles at the workplace do not face any taxable benefits.
While various methods exist for businesses to reimburse employees for fuel, the fuel benefit charges for cars and vans are currently set at:
- Car fuel benefit charge multiplier: £27,800
- Van fuel benefit charge: £757
This Budget will also confirms there will be adjustments to the Van Fuel Benefit Charges from 6 April 2025.
Advisory Fuel Rates
These rates only apply to employees using a company car.
Use the rates when you either:
- reimburse employees for business travel in their company cars
- need employees to repay the cost of fuel used for private travel
From the 1st December 2024 the advisory fuel rates for EVs is 7 pence per mile.
Rates will be reviewed by HMRC for the 1st March 2025.
Mileage Rates for cars and vans
First 10,000 business miles in the tax year = 45p per mile
Each business mile over 10,000 in the tax year = 25p per mile
Potholes
The Department for Transport (DfT) has been allocated £30 billion for 2025-26, a £1.2 billion increase from the previous year. This includes an extra £500 million for pothole repairs, enhancing the government's commitment to fix one million potholes annually. The funding represents nearly a 50% rise for local roads maintenance compared to 2024-25.
Employer National Insurance
The rate of Employer NICs will increase by 1.2 percentage points to 15%. The per-employee threshold for employer National Insurance will be reduced from £9,100 per year to £5,000 per year. These changes will take effect from 6 April 2025.
If your company participates in our EV Salary Sacrifice Scheme and decides to share National Insurance savings with employees, you are likely to see an increase in Salary Sacrifice Savings.
National Living Wage (NLW)
In this budget, it was confirmed The National Living Wage (NLW) will increase by 6.7% to £12.21 per hour from April 2025, resulting in an additional £1,400 in annual earnings for a full-time worker earning the NLW.
The rates and allowances mentioned are based on the 2024 Autumn Budget from HM Treasury and are for information purposes only. Lease Electric recommends consulting your Financial Advisor or Accountant and seeking professional advice and guidance before making any decisions.