What the 2025 Budget Means for Electric Company Cars and Salary-Sacrifice Drivers 🚗⚡
The new 2025 UK Budget confirms that as electric vehicles (EVs) become mainstream, the government’s approach to motoring tax is changing — but the message for fleets and salary-sacrifice drivers remains overwhelmingly positive.
✅ What’s Changing, and When
- From April 2028: a new “pay-per-mile” road charge
- Battery-electric cars: 3p per mile
- Plug-in hybrid cars: 1.5p per mile
- For a typical EV driver this amounts to around £255 per year — roughly half what a petrol or diesel driver would pay in fuel duty.
- The delay until 2028 gives fleets, employers, and salary-sacrifice providers time to plan and build the extra cost into quotes.
- From April 2026: the “luxury car” threshold for EV tax increases
- The threshold rises from £40,000 to £50,000.
- This means many popular EV models — even some higher-spec ones — will avoid the extra tax surcharge, translating to lower costs for many drivers.
🔎 Why EVs Remain a Smart, Tax-Efficient Choice
- Benefit-in-Kind (BiK) rates on EVs remain significantly lower than for petrol or diesel cars — reducing company car tax liability for both employees and employers.
- Even with the mileage-based charge, the overall cost of ownership for EV company cars remains lower than ICE equivalents: lower “fuel” costs (i.e. electricity vs. petrol/diesel), lower tax, and more predictable costs.
- The increased £50k threshold enlarges the pool of EVs that qualify as tax-efficient — giving businesses and drivers more flexibility when choosing “higher-end” EVs without hitting luxury-car penalties.
💷 Extra Government Support to Protect Value and Affordability
- The government is extending and adding funding to the Electric Car Grant through 2030.
- This will help keep purchase prices down — especially useful for fleets acquiring multiple vehicles.
- It also helps maintain strong residual values, which benefits salary-sacrifice providers and fleet operators that depend on residual-value estimates when calculating monthly rental rates.
📈 What This Means in Practice — Key Takeaways for Fleets, HR Teams & Drivers
- EVs remain among the most cost-effective options for company cars or salary-sacrifice schemes.
- Drivers benefit from lower overall motoring taxes, cheaper “fuel,” and predictable long-term costs.
- Employers/fleets can confidently plan business-case and cashflow models, knowing there is now a clear, stable long-term tax framework.
- The rise in the luxury-car threshold to £50k offers greater flexibility — making more EV models viable financially for employees, even at higher spec levels.
- Additional grant funding through 2030 supports affordable acquisition and strong resale values — essential for fleet economics and provider certainty.
- With the 2028 change still a few years away, organisations have time to adjust salary-sacrifice quotes, fleet budgets, and driver guidance accordingly — and potentially lock in favourable deals now.
To have an initial chat or email the team at sales@dynasty-leasing.co.uk 📧
Dynasty Partners Limited t/a Dynasty Leasing is authorised & regulated by the FCA under FRN: 941592. We are a credit broker not a lender. We work with a select group of lenders and will receive commission. The full details of how the commission arrangements work will be provided before you proceed with any arrangement. Finance subject to status and income. Terms and Conditions apply. The advice we provide is not impartial due to our commercial relationships with lenders. ICO number: ZB769101
#carleasing #carlease #carleasedeals #PCH #salary #salarysacrifice #BCH #newcar #DynastyLeasing #DynastyPartners