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Autumn Statement 2023 – the key points for fleets

3 min to readLeasing
Chancellor Jeremy Hunt has delivered the Autumn Statement, including 110 measures designed to curb inflation and promote economic growth. But does it offer enough support for fleets?
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Living Wage and National Insurance Adjustments

What is changing? The Chancellor announced a 9.8% rise in the National Living Wage (to £11.44 per hour) from April 2024 while cutting the base rate of employee Class 1 National Insurance Contributions (NICs) from 12% to 10%, which is effective from January. Class 1A rates, paid by employers, are unchanged.

Why is this important? Both changes could affect salary sacrifice schemes. These enable drivers to lease a car through their employer, funded by their gross income and (as long as CO2 emissions are 75g/km or less) they pay tax and NICs on the remaining salary and Benefit-in-Kind for the vehicle.

The Chancellor’s decision not to adjust Class 1A rates means employers miss out on reductions which could be passed onto employees – who would usually cover those costs as part of the salary sacrificed. Furthermore, the increased living wage means some employees will no longer be eligible for these schemes, as the vehicle payments would take them below that threshold.

Full Expensing Becomes Permanent

What is changing? Full expensing – a 100% capital allowance for qualifying plant and machinery – will become permanent, instead of ending in 2026. This enables the full cost of items such as plant machinery, vans, tools, and other qualifying equipment to be expensed against taxable profits and is designed to promote investment. However, it is still not available for lease vehicles.

Why is this important? Fleets are spearheading the transition to electric vehicles, and a large share of that volume is leased – according to the latest BVRLA data, 48% of business contract hire (BCH) deliveries were electric during Q2 2023. Extending capital allowances to those vehicles would enable leasing companies to pass those savings on to customers following two years of rising vehicle prices and interest rates.

The BVRLA, along with a working group made up of ALD Automotive | LeasePlan, Lex Autolease and Europcar, has spent most of this year working with HM Treasury to develop a policy solution that closes this gap. HM Treasury says a technical consultation will be published soon to establish whether there’s a case for making those changes.

Vehicle Excise Duty Increases

What is changing? The Chancellor confirmed VED rates for cars, vans and motorcycles will increase in line with Retail Price Index (RPI) inflation on 1 April 2024. There was no adjustment to the Expensive Car Supplement – currently £390 – which applies to the first five yearly renewals for cars with a list price of £40,000 or more.

Why is this important? Annual VED rates will be equalised across all vehicle types from 1 April 2025. This removes the discounts for hybrids and applies VED to electric cars for the first time (including those already on the road) – including the Expensive Car Supplement for vehicles over £40,000.

Unless the threshold for the supplement is adjusted or removed for EVs in the meantime, many popular models will face a £600 annual tax bill for the first five years – a period long enough to cover a typical fleet lease. In some cases, the resulting tax bill will be three times larger than petrol or diesel counterparts, which are more likely to be under £40,000.

What else did the Autumn Statement announce?

Published at 27 November 2023
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27 November 2023
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