Budget 2021 continues to incentivise electric vehicles

Rishi Sunak, the Chancellor of the Exchequer, yesterday presented the 2021 Budget to the Commons. From coronavirus measures to freeports to a new infrastructure bank to be built in Leeds, this year’s Budget necessarily covered a lot of ground.

But which measures will have the biggest impact on motorists? Here are some of the main points with particular focus on electric vehicles (EVs).

The first key point to note is that company car tax (BIK rate) will remain largely unchanged from April 2022 onwards with most rates being maintained until 2025. That said, the BIK rates for zero-emission vehicles will remain highly attractive rising to only 1% from 6 April 2021 and then being maintained at 2% from 2022 until at least 2025.

In contrast, vehicles with significant CO2 emissions will continue to face increasingly higher percentages to reflect their CO2 emissions. This is great news if you are planning to acquire an EV as a company car and will continue to be one of the most tax-efficient ways to own an electric vehicle for the next four years.

Second, as is usual each year, the government will increase Vehicle Excise Duty (VED or ‘road tax’) rates by inflation (RPI) with effect from 1 April 2021. VED, which is paid on vehicle ownership, depends on the vehicle type and first registration date and rates have increased in line with inflation since 2010. The tax, which is scaled according to CO2-emissions, is designed to encourage the uptake of lower emission vehicles.

Third, for fleet vehicle users, the government will also increase the van benefit charge and the car and van fuel benefit charges by the September 2020 Consumer Price Index. The change will have effect on and after 6 April 2021. Here, the flat-rate van benefit charge will increase to £3,500; the multiplier for the car fuel benefit will increase to £24,600; and the flat-rate van fuel benefit charge will increase to £669.

This measure, which will impact drivers of a company van available for their private use, or who are provided with fuel for their private use by their employer, will affect approximately 80,000 people across the UK. The government estimates around 211,000 drivers are likely to be affected by the increase in the car and van fuel benefit charge.

Last, but certainly not least, is that the Chancellor has continued the freeze on fuel duty for petrol and diesel at current rates. This means that the duties on the most popular liquid vehicle fuels have remained unchanged for a decade. Although this is good news for ICE vehicle drivers, it is a missed opportunity for further supporting the switch to electric. That said EV drivers charging at home will continue to see fuel savings for at least 70%.

Find out more about Company Car Tax

Find out more about Car Tax

Find out more about Electric Vehicles (EVs)

Olly Goodall

Author:Olly Goodall
Date Updated:4th Mar 2021

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