Impact of the Autumn Statement on Fleet Operators

January 30, 2024
Impact of the Autumn Statement on Fleet Operators

The Autumn Statement 2023 has significant implications for fleet operators in the UK. We’ve read through the various sources to bring you a clear summary to make it less daunting to navigate. 

1. Overview of the Autumn Statement

The Autumn Statement, delivered by the Chancellor, included measures that have a mixed impact on the fleet and leasing industry. Key among the 110 measures announced were making a tax break for businesses investing in plant and machinery permanent and a cut in employee national insurance contributions (NICs). However, the fleet sector expressed disappointment at the lack of further assistance in several areas​​.

Capital Allowances and Business Investment

The Chancellor’s decision to make the ‘Super Deduction’ – a 100% capital allowance for qualifying plant and machinery – permanent is a welcome step for long-term business investment, especially with the rise in corporation tax to 25% in 2024/25. This allows items like forklifts, tools, computers, vans, trucks, and tractors to be fully expensed against taxable profits. Unfortunately, cars and vehicles intended for leasing are exempt from this scheme, which means leasing companies cannot reduce their tax bills and pass on the savings to their customers. There is a need for reforms, particularly to support the electric vehicle market​​.

National Insurance and Living Wage Changes

The increase in the living wage and reduction of Class 1 Employee National Insurance Contributions (NICs) by 2% points are beneficial for households during the cost-of-living crisis. However, these changes inadvertently affect salary sacrifice schemes which make electric vehicles more accessible. The Chancellor’s decision not to adjust Class 1A rates means employers won’t see any reduction in their NICs, which could be passed on to employees. Furthermore, the increased living wage might disqualify some employees from these schemes as vehicle payments could take them below the threshold​​.

2. Electric Vehicles and Salary Sacrifice Schemes

Incentives for Electric Vans

The transition to electric vehicles is clear, with mandatory EV sales targets – 22% for new cars, 10% for new vans – being introduced next year. The Chancellor confirmed electric company car tax incentives through to April 2028. However, the business case for electric vans is less clear, as they face challenges with range, charging, and vehicle prices. Heavy batteries mean the largest electric vans have to comply with HGV-derived rules, making the adoption of electric vans more complex​​.

Impact on Salary Sacrifice Schemes

Salary sacrifice schemes play a significant role in making electric vehicles accessible. However, the Autumn Statement’s implications could undermine these benefits. With 91% of salary sacrifice deliveries being electric, it’s crucial that the Chancellor addresses the concerns around these schemes to continue encouraging the switch to cleaner vehicles​​.

3. Fuel and Charging Costs

The 5p per litre Fuel Duty reduction, in place until next March, offers some relief but doesn’t address the high energy and charging costs affecting electric vehicle drivers. Public charging costs remain a barrier to EV adoption, with average charges at rapid chargers being significantly higher than the cost of running a diesel vehicle. The government’s lack of action in reducing VAT on public charging points is a missed opportunity to stimulate EV demand​​.

4. Vehicle Excise Duty (Road Tax) Reforms

Incoming reforms to the Vehicle Excise Duty (VED) system will add a significant tax burden for electric vehicle drivers from April 2025. With the VED exemption for electric cars and discounts for hybrids ending, all vehicles will pay the same annual tax rate. The government should consider adjusting the threshold or exempting EVs altogether to account for their higher prices​​.

Conclusion

The Autumn Statement 2023 brings both opportunities and challenges for fleet operators. While some measures like the permanent capital allowances and NIC reductions are positive, the lack of comprehensive policies for electric vehicles, particularly vans, remains a concern. The fleet industry will need to navigate these changes carefully, ensuring that they continue to progress towards a more sustainable and efficient future.

NOTE: We are not experts in the political or tax world, and anything related to tax or insurance you should seek expert advice. This blog is purely for information only. 

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