Company car tax April 2028 to 2030
There is no change to previously announced rates to April 2028, but the numbers for two further tax years are now known.
- Electric cars appropriate percentage (AP) will rise 2% per year to reach 7% in 2028/29 and 9% in 2029/30
- Cars between 1 and 50g of CO2/km (Plug in Hybrids mainly) will have a AP of 18% in 28/29 and 19% in 29/30. It looks like the complication of battery range breaks of 40 and 70 miles has gone. Currently there is some difficulty for drivers, payroll and HMRC in ascertaining the correct battery range figure, so perhaps that is one reason.for this simplification.
- Other cars will see a 1% increase in the AP in 28/29 and again in 29/30. The maximum limit of 37% that has been there for years will be dropped, so that in 28/29 the maximum AP will be 38%, rising to 39% in 29/30.
Impact on Plug-in Hybrids
Drivers who sought out a PHEV with a battery range over 69 miles currently see an AP of just 5% so it will be quite a shock when this rises to 18% in April 2029. 40 mile range vehicles on 8% at the moment will be close behind when they seem the same AP of 18% in April 2028 rising to 19% the following year. It appears that the government is now less keen on promoting PHEVs, even though they can still be sold up to 2035. Although tax rates will rise steeply in the future, in 2030 the PHEV driver will still see a substantial saving by paying around half of the company car tax on an equivalent ICE vehicle.(19% AP versus 39%)
By 2028 there will be no tax incentive to provide PHEVs with long battery ranges, as long as WLTP emissions are kept below 51 grammes CO2 per km.
Fuel Duty
Still no change to Fuel Duty. Increasing Fuel Duty by 5p per litre seemed an obvious way of raising tax revenues and taxing the burning of fossil fuels, but the chancellor chose to avoid this move, even though fuel prices are low at the moment.
Double Cab pickups (DCPU)
After last year's fiasco when for a few weeks it looked as though DCPUs would be treated as company cars, the government approach will formally change in April 2025 and DCPUs will become “cars” for Corporation Tax and Income Tax. So popular vehicles such as the Ford Ranger Wildtrak purchased after 5th April 2025 will taxed at the maximum rate of company car tax. Though confusingly VAT and VED will be based on LCV rates.
For new drivers there is potentially a triple whammy here:
- BIK will be based on company car tax rates instead of the van benefit multiplier. These vehicles are heavy with high emissions so maximum rates will apply.
- Company car tax rules apply as soon as the vehicle is available for use, whereas the van BIK tax only applied if the vehicle was used more than occasionally for private use. So there could be a cliff between no tax at all and lots of tax.
- Maximum APs have been dropped from April 2028 so the BIK on DCPUs will continue to rise after then
There is likely to be a rush on now for DCPUs. Any vehicle bought before April 2025 will be subject to the old rules up to April 2029.
For companies that purchase their vehicles, DCPUs will also be treated as cars, and lose van status when it comes to claiming 100% Investment Allowance or Capital Allowances.Only 6% Special rate Writing Down Allowance will then be claimable.
Van and fuel benefit charges
These will rise in line with the CPI measure of inflation in April 2025.
Vehicle Excise Duty
The differentials between electric cars and those using internal combustion engines (ICE) will be increased in order to incentivise the uptake of zero emission vehicles, especially in the private market. We will add a table of the new First Year and Standard rates shortly.
Increase in Employers NICs to 15%
This is the largest element of revenue raising in the budget and will increase the percentage of tax on salaries that companies have to pay from 13.8% to 15% from April 2025. Benefits in kind ( BIK) such as company cars, fuel benefit, and van benefit are salary equivalents so companies will have to pay an extra 1.2%
Salary Sacrifice
The increase in Employers NICs will increase the popularity of salary sacrifice on pensions and electric cars, especially in cases where the employer is generous enough to share the NI savings that it can make by paying a lower salary. In the case of electric cars, the extra NIC saved on salary sacrificed will now be even higher than the extra NIC on the company car. How these savings are shared between the employer and employee will depend on the scheme, but there are now even more opportunities for salary sacrifice savings. This will remain a key factor in driving the purchase of electric cars, particularly the more expensive ones by higher paid employees where the savings are greatest.
The National Minimum Wage will increase by 6.7% to £12.21 in April 2025 so salary sacrifice schemes should beware of taking pay below this higher threshold. Other rates are shown on our checker at https://comcar.co.uk/pay/NMWcheck/
Plug-in van grants
£120 million will be provided to fund plug-in van grants and wheelchair accessible EVs in 2025/6. Current eligible vans are shown here https://noexhaust.co.uk/grants/plugins/
