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Toby Poston comments: Next week's Budget comes at an important moment for our sector and the UK's transition to electric vehicles. The direction of travel is well established, but the conditions needed to maintain momentum are becoming more complicated.
BVRLA members are already doing much of the heavy lifting. The question is whether the Government will provide the certainty and practical support needed to keep investing, without placing further pressure on businesses and customers.
That has been central to our conversations with policymakers, including a recent meeting with road transport decarbonisation Minister Simon Lightwood. Drawing on extensive member workshops, surveys and discussions, we have been painting a detailed picture of where the transition is working and where it needs help.
The differences across our sector are striking.
Car leasing has a relatively clear path forward, supported by company car tax incentives, but dependent on predictable rates and a healthy used EV market. Rental operators face substantial depreciation risks, customers wary of public charging costs and difficulties securing charging infrastructure. Van fleets continue to struggle with payload, range, depot connections and the cost of charging away from base.
Different markets, different challenges. There is however, one issue that unites them: the proposed introduction of electric Vehicle Excise Duty (eVED) is the wrong tax at the wrong time.
That is the first of three core messages we have put to the Chancellor ahead of the Budget.
Introducing a new pay-per-mile tax on electric vehicles risks undermining demand just as the Government needs it to accelerate. It also creates considerable administrative complexity for fleets, leasing companies and their customers. We recognise the Treasury's need to consider the future of motoring taxation, but introducing eVED while simultaneously expecting businesses to invest heavily in electrification makes little sense. Our message is to scrap the proposal.
Our second priority is protecting the company car tax framework that has been so effective in encouraging EV adoption.
Benefit-in-Kind rates for electric company cars are due to rise from 4% today to 9% in 2029/30, with nothing confirmed beyond that. Most leasing agreements last three or four years, so that uncertainty is already becoming a problem.
We want the Chancellor to hold BiK at 9% for 2030/31 and 2031/32, while protecting salary sacrifice arrangements, particularly for basic-rate taxpayers.
There is also an opportunity to make used EVs more accessible. Our latest Leasing Outlook shows used personal contract hire growing by 529% and used salary sacrifice by 168%, albeit from small starting points.
Yet drivers choosing a three-year-old electric company car are still taxed against its original list price. We want BiK calculated on 35% of the original P11D value for EVs aged three years or more, better reflecting their actual worth and stimulating used market demand.
Our third ask concerns capital allowances. Businesses need tax arrangements that encourage investment in cleaner vehicles, rather than penalising those making the transition. After a concerted effort from the BVRLA and others over a sustained period, we saw positive movement on the capital allowances regime last year. That should now go further. Expanding the leasing and rental 40% First-Year Allowance to electric cars would help operators manage the substantial upfront costs of electrifying their fleets, particularly in the commercial vehicle sector.
There is an important qualification to all three asks.
We cannot support measures that encourage EV adoption if the Treasury simply recovers the cost through higher motoring taxes elsewhere. In particular, regular Vehicle Excise Duty must not rise. Increasing the cost of keeping vehicles on the road would place another burden on businesses and motorists already managing significant cost pressures.
None of these requests requires the Government to rethink its decarbonisation ambitions. They are practical measures that recognise how fleets operate, how customers make decisions and where investment is most needed.
The Chancellor has an opportunity to reinforce what is working and fix some of what isn't.
