Published Wednesday 18th March 2020

Last week’s budget by the UK Government was one largely and justifiably overshadowed by recent developments concerning the coronavirus outbreak. With sudden and potentially long-term closures throwing many business outlooks into chaos, it’s understandable that many companies are currently concerned with survival above all else.

However, for those that can look beyond the current crisis, Mr Sunak’s budget did show some opportunities for businesses. This long-term optimism was particularly evident in the fleet sector, which received positive news during the budget.

Support for Greener Company Vehicles

The majority of the budget’s vehicle announcements concerned the transition from fuel-based to electric vehicles (EVs). There was a range of measures announced that will impact fleet managers. These include a further extended fuel duty freeze, the removal of Vehicle Excise Duty for zero-emission cars with a list price of over £40,000 and investment in more EV charging points.

The most significant announcement for fleet managers, however, was the long-awaited changes to company car tax rates. New benefit-in-kind (BIK) tax rates for company vehicles, initially published last year, will now come into force.

Pure electric vehicles (those that have a CO2 output of 0) will not pay any BIK tax for the year 2020-2021. For the majority of other cars registered from the 6th April 2020, company car tax will be reduced by 2% for the year. BIK tax for vehicles registered from that date will then increase by one percentage point over the next two tax years (2021-22, 2022-23), returning all vehicles to the same level. BIK tax rates for company vehicles will then remain at this level for the following two years (2023-24, 2024-25).

A Clear Strategy for Future Fleet

The transition to more environmentally-friendly vehicles has dominated much of the fleet sector over the last few years. Sales of diesel vehicles have dropped significantly, while hybrids have become an increasingly popular option.

However, while everyone agrees that we should make these eco-conscious transitions, there has been unhappiness with the way it has been forced onto businesses. The recent adoption of Clean Air Zones in many UK cities was one example of political ambitions forcing fleet managers into decisions that could cause more environmental and economic harm over the longer term.

The announcements concerning BIK tax on company cars are once again designed to help promote the uptake of more environmentally-friendly vehicles across the business fleet. However, the response from the industry to how these latest measures have been introduced has been much more positive.

As previously mentioned, these changes to BIK have been long in the making. They were initially announced by HM Treasury in July, after a review on company car tax in the UK hosted by the government and including stakeholder feedback.

There was concern after the autumn budget, during which the change was supposed to be implemented, was shelved to allow for a General Election, with some believing the plans could be altered. Thankfully for the industry, despite the incredible short-term uncertainty, the UK Government has kept faith in the agreed BIK programme.

Unlike some other hastily-introduced eco-friendly measures, these BIK announcements also offer business managers a long-term outlook. By outlining the picture regarding company car tax for the next five years, fleet operators can make purchase decisions with confidence.

Reduce the Cost of Your Fleet

A new long-term picture for company car tax presents an opportunity for proactive fleet managers to create new long-term savings across their operations. Here at Expense Reduction Analysts, we’ve been working in the sector for many years, specialising in effective fleet cost management. Our sector specialists have worked across a wide range of industries and fleet sizes, helping to develop long-term strategies that optimise ongoing costs.

If you’re interested in reducing the cost of your business fleet long-term, why not get in contact with our specialist team today? Alternatively, browse our case studies to see how we’ve already saved businesses money in the area.