On 30 October the United Kingdom tuned in to hear the first Labour Government for 14 years. Eagerly awaited, there had been several murmurings and rumours about what the Chancellor would include in the budget, and some announcements had also been revealed in advance. In this article, we’ll look at what this new budget means for Fleets.
Fuel Duty
It was largely expected that the budget would see an increase in fuel duty, or the removal of the 5p per litre cut that had been in place. Fuel duty has been frozen at 57.95p per litre since 2011, until the introduction of the 5p fuel duty cut brought by the previous Conservative Government in May 2022. However, Chancellor Rachel Reeves announced that she would be extending the freeze, and maintaining the existing 5p cut for another year, leaving fuel duty at 52.95p per litre. The cost to retain the 5p cut exceeds £3 billion next year but is a welcome announcement for fleet managers and motorists alike. For fleets this means that, market driven fluctuations in pump prices aside, there shouldn’t be an increase in fuel spend until March 2026.
EV charging
Under the announcements for the Department of Transport in the Autumn Budget was significant funding to support decarbonisation in the transport sector. Included in this is over £200 million to accelerate the rollout of EV charging in 2025 and 2026, which also includes support for on-street chargepoints in England installed by local authorities. Though on-street charging is likely more helpful for local residents in those areas, continued investment in the UK’s public charging network is needed and welcomed. As fleets electrify, there will be an increasing reliance on public or destination charging to sustain long journeys, overnight stays away from the depot, or drivers who are unable to charge vehicles at home.
Plug-in vehicle grant
Also included in the Transport announcements is £120 million to support the purchase of new EVs through the Plug-in Vehicle Grant (PiVG), as well as supporting the manufacture of wheelchair accessible EVs. The PiVG is a discount on the purchase price of qualifying vehicles and is currently available on a range of vans with a discount of up to £2,500 for small vans and £5,000 for large vans. Discounts of up to £16,000 and £25,000 are also available on small and large trucks respectively, but there are fewer eligible models and the overall number of grants available is limited. However, the extension of the PiVG means that fleets can continue to replace ICE vans and trucks with EVs in 2025/26 and continue to benefit from reduced pricing.
Tax and VED
The government are maintaining tax incentives to purchase EVs through changes to the Company Car Tax scheme and Vehicle Excise Duty (VED) First Year Rates. To provide long term certainty for taxpayers and industry, Benefit in Kind rates from 2028-2030 have been set to strongly incentivise the take up of electric vehicles, while rates for hybrid vehicles will increase to bring them closer in line with ICE vehicles VED rates for all cars, vans an motorcycles, excluding first year rates for cars will be upgraded in line with RPI form April 2025. First year rates for new cars registered from April 2025 will be changed to strengthen the incentives to purchase zero-emission and electric cars by widening the differential between zero-emission, hybrid and ICE cars. This significantly increases the incentives to buy new electric cars compared to those that emit higher levels of CO₂, and significantly increases the first-year tax burden for those purchasing new ICE cars.
The government also announced that at a future fiscal event they will consider increasing the threshold at which the VED Expensive Car Supplement is applied for EVs, as they recognise the disproportionate impact of the supplement on electric cars. Lastly, they will also be extending 100% First Year Allowances for zero-emission chars and EV chargepoints for a further year, increasing the incentive for fleets to begin their EV transition sooner.
Funding for manufacturing, industry and new projects
The Chancellor also announced new multi-year funding from the National Wealth Fund, for industry across the UK, including £2 billion over 5 years for the UK automotive industry which will also support growth in UK-based EV manufacturing. The National Wealth Fund mobilises billions of pounds of private sector capital investment in clean energy and growth industries to support the delivery of the UK Government’s new Industrial Strategy. The investment, which will take place across the North and the Midlands, will support the revival of vehicle manufacturing in the UK, at a critical point of the EV transition journey. This could see lead times on new EVs decrease, and potentially even cost reduction benefits which could be passed on to fleets and consumers.
Additionally, the National Wealth Fund will support the building of the UK as a ‘Clean Energy Superpower’ with £3.9 billion in funding for carbon capture and storage solutions, as well as £2 billion for 11 commercial green hydrogen projects from the HAR1 (Hydrogen Allocation Round 1). The 11 HAR1 projects represent 125MW of capacity and had been announced by the previous Conservative government. Although this new funding announcement will not directly impact fleets, the Government’s willingness to invest in green hydrogen projects could be an indicator they would consider movement towards hydrogen power for vehicles. Though this would still be many years away and significant infrastructure would be needed, it moves the UK closer in line to some other European countries such as the Netherlands who are one of the leading powers for hydrogen mobility in Europe.
Fleet managers will be relieved to know fuel duty, existing plug-in grants and first year allowances will remain unchanged for another year, but it is clear from this budget that the government are steadily increasing the incentives to purchase EVs, largely by increasing taxes on ICE vehicles to make them less attractive. Overall, the industry has been provided with a bit more predictability for the next couple of years from these announcements. However, despite the government reaffirming their commitment to restore the 2030 ICE car ban, there is still much uncertainty in the industry as we inch closer to the 2035 ban on all new ICE cars and vans.
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