News: UK Budget for Fleet Management 2024
In the latest UK Budget, Chancellor Rachel Reeves introduced several key updates that will impact fleet operators, company car drivers, and businesses across the country.
From changes to company car tax (CCT) to tweaks in vehicle excise duty (VED) and fuel duty, these announcements are designed to offer some relief while also pushing for greater sustainability in fleet operations. Let's break down the most significant changes and their implications for fleet management.
1. Company Car Tax (CCT) Updates
One of the most significant changes in the 2024 Budget was the extension of company car tax bands all the way through to 2030. Previously, fleet operators only had visibility of tax rates until April 2028, but this update provides much-needed certainty for businesses looking to plan long-term.
The Chancellor confirmed that tax incentives for electric and plug-in hybrid vehicles (EVs and PHEVs) will remain in place until at least 2030, though these vehicles will face the steepest tax increases over the next several years. Specifically, zero-emission vehicles will experience a 2% annual tax increase from 2028, eventually reaching 7% by 2028/29 and 9% in 2029/30. While these increases represent a substantial hike, they still offer a favourable alternative compared to petrol and diesel vehicles, which will see similar or higher rises across the same period.
One notable change is the treatment of plug-in hybrids. From 2028, cars with CO2 emissions between 1-50g/km will be placed in a single 18% tax band, significantly increasing tax bills for many plug-in hybrids that currently benefit from lower rates based on their electric range. This change could reduce demand for plug-in hybrids with longer electric ranges, as these vehicles will see their tax liabilities nearly triple.
Additionally, the Chancellor addressed a few loopholes in the system. Employee car ownership schemes that are seen as "contrived" will be phased out by April 2026, and double-cab pickup trucks will now be taxed based on their CO2 emissions starting in April 2025, aligning them with passenger car rates.
2. Vehicle Excise Duty (VED) Adjustments
Changes to vehicle excise duty (VED) were also a significant part of the Budget. From April 2025, all vehicles registered since April 2017 will pay the same £195 rate, regardless of their powertrain type, which means that electric vehicles (EVs) will no longer be exempt from VED. However, new zero-emission vehicles will benefit from a £10 first-year VED rate, which will remain frozen until 2029/30.
Another notable adjustment is the £425 "Expensive Car Supplement," which will be applied to new cars priced over £40,000, regardless of whether they are petrol, diesel, hybrid, or electric. This change could impact several high-end electric vehicles, like the Tesla Model Y, which are priced over £40,000 but now face significantly higher VED costs.
For plug-in hybrids, the first-year VED rates will also rise significantly. Vehicles emitting between 1-50g/km CO2 will face a jump from £0 to £110, while cars emitting between 51-75g/km CO2 will see first-year VED rise from £20 to £130. These increases are part of an ongoing effort to align VED with vehicle emissions, but they also present a financial challenge for businesses relying on hybrid vehicles.
3. Fuel Duty and Public Charging Costs
The Chancellor’s decision to extend the 5p per litre fuel duty cut for another 12 months is a welcome move for fleet managers, especially given the ongoing pressure on household and business budgets. The freeze on inflation-linked fuel duty increases, which has been in place since 2011, will prevent an anticipated 7p per litre rise at the pumps—something that would have added significant costs for fleets.
However, the Chancellor did not address the rising costs of public EV charging, which continue to be a point of concern for businesses transitioning to electric vehicles. Despite fuel prices being at their lowest in three years, the cost of charging an EV at a public rapid charging point has surged, often matching or exceeding the cost of petrol for vehicles with poor fuel efficiency. Calls to reduce the 20% VAT rate on public charging (in line with home charging) went unanswered, which means fleets relying on public charging stations will continue to face higher operational costs.
4. Employer National Insurance Contributions (NICs)
Changes to employer National Insurance Contributions (NICs) will also have an indirect impact on fleet operations, particularly for businesses offering company cars or salary sacrifice schemes. From April 2025, the employer NIC rate will increase from 13.8% to 15%, while the income threshold for NICs will decrease from £9,100 to £5,000. This means that businesses will see an 8.7% rise in their NIC bills, with the additional cost of £144 for a £40,000 hybrid vehicle, or £16 for an electric vehicle.
These increases could make salary sacrifice schemes even more attractive, as employees can lease vehicles through their employer using pre-tax income. This scheme remains one of the most cost-effective ways for employees to access electric cars, as lower tax bands (such as 2% for zero-emission vehicles) make electric vehicles more affordable compared to traditional cars.
The 2024 Budget brings a combination of positive incentives and financial challenges for fleet managers. On the one hand, extended tax bands and the freeze on fuel duty provide some much-needed stability for businesses operating company fleets. On the other hand, the increased tax burden on plug-in hybrids, changes to VED, and rising costs for public EV charging highlight the ongoing hurdles that fleets will need to navigate as they transition towards a more sustainable future.
As fleet managers plan for the years ahead, it’s essential to consider the long-term financial implications of these changes and to stay informed about future adjustments. The government's emphasis on sustainability and electrification is clear, but businesses will need to balance these environmental goals with the practical realities of cost and vehicle availability.