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EVs: The market for electric vehicles could go flat after the Budget

Author: Robin Roberts

The Budget will batter businesses which need to run cars and vans and further stall the slow take up of electric vehicles.

Leasing companies will also be hit, and employees who enjoy free fuel will suffer higher taxes in as part of what the AA called a “Budget Blow-Out”.

Fuel prices will rise and the Government has reaffirmed its intention to phase out the zero allowances for greener cars as the EV car and van market struggles to make headway with higher priced models.

Analysts now say it will be up to the vehicle makers to drastically slash EV prices to build sales and recover investments they have already planned.

The AA says fuel increases will force two thirds of drivers out of their cars for some journeys.

Edmund King, AA president, said, “At a time of record prices at the pumps the August increase in duty is a budget blow-out and could bring a summer of discontent for many.

“We have heard much about tax allowances but the increase in fuel duty makes no allowance for car-dependent, rural and disabled drivers.

“The Government seems intent on inflicting more pain for no gain on drivers.”

Mr King added that such a hike in duty doesn’t necessarily help government finances as people will cut spending at the pumps and in shops, and it could fuel inflation.

”We welcome the recognition that new investment is needed in the road infrastructure but are not convinced that the water industries offer a good precedent to follow. New river crossings in east London are much needed to reduce congestion and improve accessibility.”

Mike Moore, director in Deloitte’s automotive team, said the Budget will bring home to businesses the need to consider the carbon footprint of their vehicles to control costs.

“The Government has continued the trend of using the tax system to green the UK’s business fleet.  The Chancellor has listened to lobbying, giving certainty on the benefit in kind charge for company cars through to the tax year 20016/17 and removing the 3% diesel supplement from April 2016. The highest percentage that can be applied to the list price of a car will increase from 35% to 37% from April 2015.

“The car fuel benefit charge will increase from £18,800 to £20,200 from April 2012. This, along with the increase in the percentage that will be applied to car fuel benefit charge continues the objective to make free fuel an unattractive benefit.

“The Government estimates the changes along with the amendments to the capital allowance and tax relief rules will lead to an increase in the tax take in excess of £600 million on company cars.  This means that businesses should seriously consider the carbon foot print of their fleet in order to control costs.”

BVRLA chief executive John Lewis said, “This is clearly a Budget for business and employment that is likely to stimulate growth for many of the fleet industry’s customers.

“However, the Chancellor’s enthusiastic efforts to drive down emissions-based capital allowances for company cars could be a step too far, too soon.

“The fleet sector is the only part of the new vehicle market that is still growing at the moment. It will adapt to the new tax regime as it always does, but these ambitious targets could bring a temporary stall to the market as businesses re-evaluate their fleet policies.”

David Brennan, Managing Director at LeasePlan UK, said, “LeasePlan welcomes the government’s commitment to invest in UK road infrastructure, but introducing more toll roads is not the solution. The M6 Toll has highlighted the shortfalls of this policy initiative.

“Faced with some of the highest charges in Europe, motorists are still opting for the neighbouring M6, where traffic levels are rising. Tackling congestion is important, but it must not come at an additional cost to business drivers – many of whom will be unwilling to pay.”

He also said, “Soaring fuel prices are already placing a severe financial strain on businesses at a time when they are already under economic pressures.  The Chancellor’s decision to retain August’s duty hike imposes a further burden. This short-sighted move threatens to undermine Britain’s economic recovery if business mobility becomes prohibitively expensive.”

The Government’s proposals for greater investment in UK businesses are a welcome development. Tax cuts and credit-easing will be a significant help to many businesses at a time when the UK economy remains fragile but LeasePlan is optimistic that 2012 will, on balance, bring greater confidence to the SME sector, he added.

Budget bites

Company car tax

Company car tax rates from 2014 to 2016 will see the appropriate percentage of list price subject to tax increase by 1% for cars emitting more than 75g/km of carbon dioxide, to a maximum of 35% in 2014–15, and by 2%, to a maximum of 37% in both 2015–16 and 2016–17.

From April 2015, the five-year exemption for zero carbon and ultra-low carbon emission vehicles will come to an end as legislated in Finance Act 2010.

The appropriate percentage for zero emission and low carbon vehicles will be 13% from April 2015 and will increase by 2% in 2016/17.

From April 2016, the Government will remove the 3% diesel supplement differential so that diesel cars will be subject to the same level of tax as petrol cars.

The Government will also exclude certain security enhancements from being treated as accessories for the purpose of calculating the cash equivalent of the benefit on company cars made available for private use. The changes take effect retrospectively from 6 April 2011.

Van benefit charge

The Government will freeze the van benefit charge at £3,000 in 2012/13. From April 2015, the five year exemption for zero carbon vans from the van benefit charge will expire, as legislated in Finance Act 2010.

Vehicle excise duty

From 1 April 2012, VED rates will increase in line with the RPI, apart from VED rates for Heavy Goods Vehicles which will be frozen in 2012/13.

The Government will consider whether to reform VED over the medium term to ensure that all motorists continue to make a fair contribution to the sustainability of the public finances, and to reflect continuing improvements in vehicle fuel efficiency.

In addition, the Government aims to develop a direct debit system to allow motorists to spread their VED payments. The Government will seek the views of motoring groups on these measures.

The Government will reduce tax disc postage costs by extending to fourteen days the grace period, following the payment of tax, on the non-display of a tax disc in a vehicle.

The Government has said it will also reduce the administrative burdens on car leasing businesses by extending the date-to-end-month scheme to VED exempt licences.

Car fuel benefit charge

From 6 April 2012, the fuel benefit charge (FBC) multiplier for cars will increase from £18,800 to £20,200, and will increase by 2% above the RPI in 2013/14.

The Government commits to pre-announcing the FBC multiplier one year ahead.

Van fuel benefit charge

From 6 April 2012, the van FBC multiplier will be frozen at £550, and will increase by the RPI in 2013/14. The Government commits to pre-announcing the FBC multiplier one year ahead.


The 3ppl increase in September goes ahead after the chancellor says action taken in previous Budgets has already cut fuel costs by 6ppl.

As announced at Budget 2011, the Government will introduce a Fair Fuel Stabiliser. Further details of how the stabiliser will follow.

Capital allowances

From April 2013, the Government will extend the 100% first year allowance (FYA) for businesses purchasing low emissions cars for a further two years to 31 March 2015.

The carbon dioxide emissions threshold below which cars are eligible for the FYA will also be reduced from 110g/km to 95g/km, and leased business cars will no longer be eligible for the FYA.

From April 2013, the carbon dioxide emissions threshold for the main rate of capital allowances for business cars will reduce from 160g/km to 130g/km.

The threshold above which the lease rental restriction applies will also reduce from 160g/km to 130g/km.

Remember you can always call on Business Car Manager to provide you with the best  business car news and business car advice.



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