Spring Budget 2024

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Measure

Company cars – electric and conventional vehicles

The measure

The Chancellor announced that:

  • the percentage of the list price which is used to calculate the company car benefit for electric cars will be increased from the current rate of 2% to 3% for 2025/2026, to 4% for 2026/2027 and to 5% for 2027/28; and
  • the percentage of the list price which is used to calculate the company car benefit for most other cars will be increased by one percentage point for 2025/26 up to a maximum percentage of 37% and will then remain fixed in 2026/27 and 2027/28.

 

Who will be affected?

Employers who provide company cars, together with employees who benefit from the use of these vehicles, will be affected by these measures. 

 

When will the measure come into effect?

The measures will not take effect until 6 April 2025.

Our view

Overall, these changes will mean provision of any type of company car will become more costly than was previously the case for both employers and employees. 

However, even after the increases, the benefit in kind (BIK) rates for EVs remain modest in comparison to conventional cars and represent a continued commitment to encouraging EV adoption through company car schemes. Signposting the road ahead for BIK rates is particularly important for these schemes, where it is common for lease commitments to extend 3-4 years ahead. Commitment to low rates for the medium-term will maintain a very strong economic incentive for employers to offer EV schemes and for employees to adopt them.