Autumn Budget Delivers Tax Hikes for EV and PHEV Fleets

Fleet specialists have warned that the Autumn Budget fell short of delivering vital tax breaks needed to support plug-in hybrid and electric company cars. For operators, the Chancellor’s key announcement outlined company car tax rates for the 2030/31 tax year, following industry calls for clarity. Company car drivers, including those on salary sacrifice schemes, pay Benefit-in-Kind (BiK) tax for private use, which is treated as additional salary and taxed at income tax rates of typically 20% or 40%. The taxable value is calculated as a percentage of the car’s list price across 27 bands ranging from 4% to 37%. HMRC data shows three-quarters of company car drivers pay BiK on vehicles emitting under 50g/km. The Budget confirmed all rates will increase by one percentage point in April 2030. Electric vehicles face steep rises, moving from 4% in 2026/27 to 10% in 2030/31. For a 20% taxpayer in a Volkswagen ID 3 Style with a 79kWh battery, monthly BiK bills will rise from £27 to £67. Plug-in hybrids (PHEVs) fare worse, as the 2024 Budget removed incentives for vehicles between 1-50g/km CO2 based on electric range, placing them into a single 18% band. A Volkswagen Golf eHybrid with an 88-mile electric range will see BiK rise from 7% today to 20% in 2030/31, tripling monthly payments from £44 to £133. Dave Bushnell, director of consultancy and strategy at Fleet Operations, welcomed the step toward restored confidence but noted it missed an opportunity to make used electric company cars more affordable by taxing them on original list prices rather than depreciated values. Capital Allowances changes were also confirmed, enabling businesses to offset investment costs against gross profits. For cars, businesses can offset 100% of the cost of zero-emission electric and hydrogen cars, dropping to 14% for 1-50g/km vehicles and 6% above that threshold. The 14% main rate was cut from 18% in April 2026 and will fall to 12% in April 2027, reducing tax breaks for business-purchased PHEVs in that bracket. Leased car tax breaks remain unchanged, allowing businesses to offset 100% of monthly rental costs for vehicles emitting 50g/km CO2 or less. Grey fleet costs will also rise; HMRC’s approved mileage rate for employees driving their own cars for work has been made permanent at an initial rate raised from 45p to 55p per mile (up from a temporary June increase), while the higher-mileage rate increases from 25p to 35p. These changes are the first in 15 years and support three million employees. Jon Lawes, managing director at Novuna Vehicle Solutions, emphasized that greater certainty on EV taxation, charging costs, and sales targets is critical to sustaining demand and protecting used-car values.