Yesterday’s Autumn Budget 2024, presented by Chancellor Rachel Reeves, introduced several significant changes and sustained incentives for electric cars. The Government’s plan includes adjustments to Benefit-in-Kind (BiK) tax rates, maintenance of salary sacrifice benefits, and increased first-year Vehicle Excise Duty (VED) incentives for EVs. Here’s a look at the major updates affecting EV drivers:
Key Changes for Electric Cars in the 2024 Budget
1. Benefit-in-Kind (BiK) Tax Rates Remain Low for EVs
One of the most impactful announcements in Budget 2024 is the retention of low BiK tax rates for electric company cars. Currently, EVs enjoy a BiK rate much lower than that of petrol and diesel vehicles, which can reach up to 37% depending on emissions. For EVs, the BiK rate will continue to rise by just one percentage point each year until 2027/28.
This stability in BiK rates provides predictability for employees and employers, so it’s easier for companies to integrate EVs into their fleets.
2. Vehicle Excise Duty (VED) Incentives for EVs
Starting in April 2025, the first-year VED rate (AKA road tax) for EVs will see a gradual increase. The differential between EVs and conventional vehicles will widen in the initial year, making it cheaper for first-time EV buyers compared to those purchasing petrol or diesel cars.
3. Continued Support for Salary Sacrifice Schemes
Salary sacrifice schemes for EVs received a strong endorsement in the Budget, with Reeves underscoring the role these schemes play in EV affordability. Under salary sacrifice, employees can opt for an EV as part of their compensation package, with monthly payments taken pre-tax.
The sustained low BiK rates on EVs mean these schemes remain advantageous until 2030 at the very least, particularly for higher-rate taxpayers who can save more by diverting pre-tax income to cover EV leasing costs.
This measure supports more employees in accessing EVs through their employers and reduces the financial burden associated with going electric. The continued availability of these schemes positions salary sacrifice as a practical, affordable route for EV acquisition, making EVs accessible to a broader segment of the workforce.
MORE> How do salary sacrifice schemes work?
4. Funding for Domestic EV Manufacturing and Infrastructure
In a bid to strengthen the UK’s EV supply chain, the Budget also includes multi-million-pound investments in EV manufacturing, specifically targeting the development of gigafactories. This investment is seen as a step toward making the UK a key player in the global EV market, reducing reliance on imported EVs and enhancing local access to cutting-edge technology.
5. HMRC Mileage Rates for EVs
The Budget left open the potential for updates to the HMRC mileage rates (Advisory Electric Rate, or AER) for EVs. Currently, the mileage rate for EVs stands at 7p per mile, which is below the mileage rate for petrol and diesel vehicles. However, as EV running costs evolve and the number of drivers using EVs for business purposes increases, there is scope for the Government to revise these rates to better reflect actual costs.
Budget 2024’s Impact on EVs
The Budget 2024 marks a clear commitment from the UK Government to support the transition to electric vehicles. By preserving low BiK rates, expanding VED incentives, backing salary sacrifice schemes, and investing in domestic EV production, the Budget is working hard to accelerate EV adoption and bring the country closer to its 2035 target for zero-emission vehicle sales.
John is the Editor and Spokesperson for Electric Car Guide.
With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.
John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.
