Autumn Statement averts the fall of electric company cars
Following the publication of the Autumn Statement, increased clarity has been provided for fleets and company drivers – both those in the process of electrifying their fleet with company cars or salary sacrifice schemes and when reviewing vehicle choice lists.
Arval UK Commercial Director, Joel Lund, said: “A number of company electric car drivers breathed a sigh of relief as the Chancellor read out the Autumn Statement, which cut through some of the areas of uncertainty for businesses and their drivers, allaying concerns of a huge hike in taxes.
“That clarity came in the confirmation of company car tax from 2025/26 to 2027/28 for ultra-low emission (-75g CO2 per km) and electric vehicles. And confirmation that plug-in cars will now pay road tax of varying rates depending on their date of registration and type. While that may seem to be a blow, it does mean that there are less unexpected costs for fleets and their drivers, as they will be contributing in the same way as petrol and diesel vehicles, although at a much lower rate.
“Separately to the budget, from 1 December 2022 the Advisory Electricity Rate (AER) will also increase to 8p per mile. Although this doesn’t go quite far enough to close the gap between varying charge rates, in combination with the lower company car taxes, it helps to manage increasing financial pressures - the rate will be reviewed on a quarterly basis, which will hopefully keep it on the coat tails of electric charging rates.
“Now we have increased clarity, if you haven’t already, I would urge you to reach out to your Business Manager to look at your salary sacrifice and company car scheme options, which will enable you to call on consultancy expertise for your bespoke business requirements, if needed.”
We have provided some key take outs and detail on the Autumn Statement below.
Three years of clarity on Company Car Tax rates (Benefit in Kind)
Support for electric and ultra-low emission cars emitting less than 75g of CO2 per kilometre has continued with the government setting rates to April 2028, within the Autumn Finance Bill 2022. Currently rates are set at 2% for electric cars until 2024-25 and will then increase by 1 percentage point in 2025-26, a further 1% in 2026-27 and a further 1% in 2027-28, up to a maximum appropriate percentage of 5% for electric cars and 21% for ultra-low emission cars.
Rates for all other vehicles’ bands will be increased by 1 percentage point for 2025-26, up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.
Vehicle Excise Duty unravelled for electric vehicles and vans
From April 2025, electric cars, vans and motorcycles will begin to pay VED in the same way as petrol and diesel vehicles. The government has highlighted that this will ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate. It will legislate for this measure in the Autumn Finance Bill 2022.
This means:
- new zero emission cars registered on or after 1 April 2025 will be liable to pay the lowest first year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km), currently £10 a year. From the second year of registration onwards, they will move to the standard rate, currently £165 a year
- zero emission cars first registered between 1 April 2017 and 31 March 2025 will also pay the standard rate
- the Expensive Car Supplement exemption for electric vehicles is due to end in 2025. New zero emission cars registered on or after 1 April 2025 will therefore be liable for the expensive car supplement. The Expensive Car Supplement currently applies to cars with a list price exceeding £40,000 for 5 years
- zero and low emission cars first registered between 1 March 2001 and 30 March 2017 currently in Band A will move to the Band B rate, currently £20 a year
- zero emission vans will move to the rate for petrol and diesel light goods vehicles, currently £290 a year for most vans
- rates for Alternative Fuel Vehicles (for example hydrogen) and hybrids will also be equalised.
Van Benefit Charge and Car & Van Fuel Benefit Charges
From 6 April 2023, Car and Van Fuel Benefit Charges and van benefit charge will increase in line with CPI. The government will legislate by way of Regulations in December 2022
First Year Allowance for Electric Vehicle Chargepoints
The government will legislate in the Spring Finance Bill 2023 to extend the 100% First Year Allowance for electric vehicle chargepoints to 31 March 2025 for corporation tax purposes and 5 April 2025 for income tax purposes. This will ensure that the tax system continues to incentivise business investment in charging infrastructure.
More detail on the Advisory Electric Rates
HMRC has provided more information on Advisory Fuel and Electric rates on gov.uk here - the new 8p per mile EV rate will be reviewed on a quarterly basis and will apply from 1 December 2022. This change will need to be factored into whole life cost based models when reviewing vehicle choice lists.
