Research from Volkswagen Financial Services (VWFS Fleet) shows the impact of uncertain Benefit in Kind (BiK) rates on the uptake of electric vehicles. 83% of fleet operators said the uncertainty beyond 2025 could impact their uptake of electric cars.
VWFS Fleet is urging the government to provide clarity on BiK rates after 2025. With several changes over the past few years, drivers are unable to calculate the total cost of ownership of a company car with total certainty as the rates may well be changed mid-term. In a survey of 197 fleet operators, 97% agreed that there needed to be greater visibility beyond 2025. 86% said they might consider shorter lease or rental terms for electric vehicles due to the uncertainty.
Over the past three years alone, BiK tax was cut from 16% in 2019/20 to 0% in 2020/21 for electric vehicles (EVs). The rate was then raised to 1% in 2021/22, then climbed again to 2% in the current tax year (2022/23). The rate is frozen at 2% until 2025.
The original cut to 0% and low rates over the past couple of years have been a huge incentive for company car drivers to switch to EVs, which is crucial if the UK is to hit the Government target of 2030 to stop the sale of internal combustion engines.
However, the lack of certainty beyond 2025 poses a threat to EV uptake, particularly concerning as the 2030 ban on new petrol and diesel cars and vans looms.
Drivers taking on an electric company car on a three or four-year lease now won’t know how much their car will cost them in the final years of their lease.
Emma Loveday, Senior Fleet Consultant at VWFS Fleet, said: “The lack of clarity over BiK rates is clearly a significant issue for company car drivers and fleet operators.
“If you’re looking to take on an EV as a company car now, you won’t know what tax you’ll be paying on it in 2025, and this worry will only increase as we get closer to that date. Employees want certainty on what they’ll be paying now, and in the future, especially in the current economic climate with the cost-of-living crisis being a major concern for many.
With the plug-in grant for cars abruptly ending in June this year, and the £350 home charger grant also being withdrawn at the end of March, financial incentives to transition to electric are being removed, so the sooner we get clarity on BiK rates, the better.”