What the… Budget?

Earlier today (30th October), Chancellor of the Exchequer Rachel Reeves shared the government’s Autumn Budget.  This included a handful of changes that will impact businesses and fleets.

To make it simple, here’s a quick first look at what today’s changes mean for your fleet. Plus, we’ll soon be releasing an in-depth guide to today’s events. So keep your eyes peeled.  

1. Benefit-in-Kind

For the last few years, Benefit-in-Kind (BIK) rates have been set to push businesses and employees to switch to battery electric vehicles (BEVs). This means BIK rates for BEVs have been set significantly lower than those for petrol or diesel vehicles.  

Before today, the government had already announced plans for the BIK rate until April 2028: 

• April 2025 – March 2026: 3% 

• April 2026 – March 2027: 4% 

• April 2027 – March 2028: 5% 

Today, it announced plans for BIK rates for BEVs beyond April 2028. This offers more certainty for businesses taking out new four-year lease cycles for their company car fleet. The rates beyond 2028 will be: 

• April 2028 – March 2029: 7%  

• April 2029 – March 2030: 9% 

To explain what these changes will mean, we’ve estimated the average future BIK tax for employees: 

These changes do mean an increase in BIK tax paid by employees for BEVs. However, they remain significantly below the average BIK rates for petrol and diesel vehicles, which are set to reach up to 39% by April 2029 – March 2030.  

It’s also widely recognised that PHEVs are often driven in petrol mode and, as a result, don’t always materially reduce carbon emissions compared with petrol or diesel vehicles. To tackle this and further incentivise BEVs, the government has also announced further increases in BIK rates for PHEVs from April 2028.

2. Fuel duty

Fuel duty – the levy placed on purchases of petrol, diesel, and other fuels – was expected to increase for the first time in over a decade. However, in a surprise move, the Chancellor has decided to maintain the current rates for a further year. 

For fleets still operating many petrol or diesel vehicles, this has protected them from significant fuel cost increases. For example, for a fleet operating 100 internal combustion engine (ICE) vehicles, each undertaking on average 10,000 annual business miles, there could have been an increase in costs of around £5,700. 

3. Employers’ National Insurance Contribution (NIC)

As widely expected, employers’ NIC is set to rise, however by a greater rate than predicted; increasing by 1.2% from 13.8% to 15% effective from April 2025. 

This will increase the overall salary costs for employers and will also increase the whole life cost of company cars. The impact on a typical fleet of 100 petrol or diesel cars is shown below: 

There will also be an increase in the overall cost of cash allowances as a result of this change. However, the increase in employers’ NIC for a typical BEV car is significantly less due to the very low Benefit-in-Kind rate, which will incentivise more fleets to transition to electric, as the Chancellor expressed the government’s commitment to facilitate.

Similarly, the rise in employers’ NIC rate may encourage more organisations to consider introducing car Salary Sacrifice schemes as employers’ NIC saved on the gross cash sacrificed will increase as a result.

4. Vehicle Excise Duty

Vehicle Excise Duty (VED) is the annual tax paid for vehicles driven on public roads.  

An increase in VED was expected for BEVs; however, the Chancellor has set out that the budget will maintain existing incentives to further encourage transition to electric vehicles.  

Zero emission vehicles will pay the lowest first year rate of £10 until 2025/26. However, there will be an increase in VED for PHEVs, as well as internal combustion engine vehicles, with staggered increases based on emissions. For example, for those emitting 76g/km of CO₂ or above, rates will double from 2025-26; widening the differentials and strengthening incentives to transition to BEVs.