18 November 2024
It’s now been two weeks since the budget was announced.
While the headlines were captured by Employer National Insurance Contributions (NICs), farmers’ inheritance, as well as the sheer size of the overall tax take, for EV drivers there were slivers of good news, as well as news that could have been worse.
In the context of multi-billion pound black holes and the political framing of fiscal pain, suffering and woe, the lead up to the budget was setting expectations against huge spending sprees. This was never going to be a ‘giveaway’ budget.
It is also revealing that at the height of her political powers and with all the discussion around tax increases, the Chancellor still decided to freeze fuel duty. If there was ever a time to do it, this would have been it. The fact it was trailed before the budget, and there was still some uncertainty right up to the moment Reeves announced it, makes it all the harder to swallow.
The ‘freeze’ in fuel duty has now cost over £80bn in lost revenues since this charade began in 2011, and will cost another £3bn for this year.
For the wallets of EV drivers there were two bits of reasonably positive news.
BIK and the overall salary sacrifice scheme is arguably the most important policy driver for the uptake of EVs in the UK. It is certainly the only significant financial benefit for consumers when deciding what car they should get.
Firstly, what is BIK. In short, it’s the tax you pay if you have a company car, or a salary sacrifice car.
In slightly longer terms, you multiply the cars list price (the P11D value) by the BIK percentage banding, then multiply that figure by your tax band.
So for my lovely Kia Niro 2, that means:
£37,270 x 2% x 40% = £298
Now, if I drove a petrol car instead, a slightly less lovely Niro estate hybrid, this would work out as:
£29,865 x 25% x 40% = £2,987
That’s quite a big difference, and comes down to the fact that the BIK rates are preferential to EVs. The Niro hybrid has a CO2 rating of 100g/km and that attracts a 25% BIK rate.
For the most polluting cars, those huge Chelsea tractors that so many in Britain seem obsessed with, the BIK rate is 37%. So to pick a Range Rover at random (4dr 3.0 p400) would be:
£105,700 x 37% x 40% = £15,644
This in reality attracts such a large tax bill as to make it nonsensical to get as a company car/salsac.
Before the budget, we only had sight on what the BIK rates would be up to 2028. So an extension was something that had to happen, or else leasers and salary sacrifice consumers on 3-year+ contracts wouldn’t know their liabilities for the length of the contract.
The chancellor set out an additional 2 years of BIK rates, and EVs continue to have a beneficial rate compared to other bands. The table below shows the rates for the three cars given as an example above.
| CO2 (g/km) | Electric range (miles) | 2023/24 (%) | 2024/25 (%) | 2025/26 (%) | 2026/27 (%) | 2027/28 (%) | 2028/29 (%) | 2029/30 (%) |
|---|---|---|---|---|---|---|---|---|
| 0 | N/A | 2 | 2 | 3 | 4 | 5 | 7 | 9 |
| 100-104 | 25 | 25 | 26 | 26 | 26 | 27 | 28 | |
| 170+ | 37 | 37 | 37 | 37 | 37 | 38 | 39 |
This was welcomed, and although the rates have gone up, they are still have offer a big differential compared to ICE vehicles.
This is another area where differentials are the main area of good(ish) news. As many EV drivers will be becoming aware, EVs will have to pay Vehicle Excise Duty from next year. This was announced in the 2022 budget and is something that is quite unwelcome so early in the transition.
How much tax depends on the car’s age, and value. EVs registered on or after 1 April next year will pay £10 in the first year, increasing to £190 from the second year onwards. This also applies to electric vehicles first registered after 1 April 2017.
For EVs first registered between 1 March 2001 and 31 March 2017 it will be £20 per year.
The sting in the tail from the 2022 budget was the introduction of the ‘Expensive Car Supplement’. This means EVs priced over £40,000 will need to pay £355 every year from the second to sixth year of registration, which drops down to the standard rate (£190) after the seventh year.
The good news in this budget, is more schadenfreude than anything. From next year, VED on ICE vehicles is doubled. So it’ll still cost you more for an EV, but not as much as if you were driving an ICE car.
The glimmer of actual positive news is that the government are considering a change to the Expensive Car Supplement for EVs, in recognition that EVs are still more expensive than their ICE versions.
This is good news, especially considering the crunch and real difficulties we are seeing in the van market.
It is not entirely clear what this money has been set aside for, and seems to sit within the modern industrial strategy work that DBT is undertaking.
Positive news, the details of spending are yet to be decided, but likely this will mean an extension of LEVI funding as well as some more targeted schemes on cross-pavement charging solutions such as gullies.
Good news for upskilling EV repair/manufacturing sector.
Alongside major reforms on the National Planning Policy Framework, this could speed up and help reduce current barriers for new charger installations.
Finally, some news that might fill in our pothole woes, in the best way possible!
In essence, this was as good as could be hoped, with new money for vans and chargers. That alone is more than many other areas got – to not recognise this would be churlish.
This was the ‘pain’ budget, and the hope is with many of the really tough decisions made future budgets may be more expansive over the course of parliament.
Planning for the next budget starts as soon as the chancellor finishes delivering their speech, and is a leviathan effort. There are many areas EV advocates need to start/restart their efforts on. The campaign for reducing VAT, grants for new/second hand cars, and supporting fleets are all areas that could be addressed at the next budget and EVA England will be looking to play our part in that work.
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