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Strap your seat belts on. Here is a summary and our verdict of the Budget and how it will effect businesses.
1) Class 1a NI – now (is live) increased from 13.8% to 15%.
Our verdict – it’s a small amount if you have a small BiK percentage, so the larger your BiK, the larger the increase. I already had a blog on this and it has been updated - you can read it here showing the difference in payment pre and post budget – notice how the higher CO2’s are hit hardest. See Class 1a NI on a company car
2) Company car tax.
We have written confirmation of all the tables up to 2029/30. Basically everything is increasing, the new table can be seen at Benefit in Kind Company Car CO2 tax tables from 2022/23 to 2029/30 | Every Vehicle Lease
(a ) PHEV’s - the largest increase will be for plug in hybrid drivers (PHEV’s) – in 2028/29 the EV range of the battery is not applicable anymore, they all fall into a 18% tax bracket…..that’s tough if you have gone with a high battery mileage car in my opinion eg the new Audi A3 Sportback PHEV, Skoda Enyaq PHEV and even the Land Rover Range Rover Sport – they will move from 8% in 2027/28 to a whopping 18% - ouch.
Our verdict – get your plug in hybrid ordered and delivered before 30/3/25 and take it on a 3 year lease (don’t go 4 year lease)!!!! You will definitely need to move to full electric on your renewal in March 2028.
(b ) Electric cars – a lot smaller increase than PHEV’s but instead of the usual 1% percentage rise, it will be an increase of 2% in both the 2028/29 (7%) and 2029/30 (9%). No, I’m old school, increasing something from 1% to a 2% jump is 100% increase!
Our verdict – full electric is going to be the cheapest benefit in kind for all employees so we have no choice. My concern is 2 fold – (i) increase in monthly company car tax and (ii) increase in car BIK (the bit that goes on your PAYE code). Example below of a BMW I4 40 M Sport with metallic paint – P11D value of £61685 (as of 5/11/24).
| Tax Year | 2024/25 | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 2029/30 |
| P11D | £61,685 | £61,685 | £61,685 | £61,685 | £61,685 | £61,685 |
| BIK % | 2% | 3% | 4% | 5% | 7% | 9% |
| Car BIK | £1,233.70 | £1,850.55 | £2,467.40 | £3,048.25 | £4,317.95 | £5,551.65 |
| 20% tax Per annum | £246.74 | £370.11 | £493.48 | £616.85 | £861.59 | £1,110.33 |
| 20% tax Per month | £20.56 | £30.84 | £41.12 | £51.40 | £71.79 | £92.53 |
| 40% tax Per annum | £493.48 | £740.22 | £986.96 | £1,233.70 | £1,723.18 | £2,220.66 |
| 40% tax Per month | £41.12 | £61.69 | £82.25 | £102.81 | £143.60 | £185.06 |
Above - Company car tax example for a full electric vehicle (BMW I4 40 M Sport with metallic paint – P11D value of £61,685).
On point (i) You can see in the above graph how a 20% tax paying employee taking delivery of this car today on a 4 year business contract hire lease will see their company car tax increase from £20.56 (now until 5/4/25) to £71.79 (from 6/4/28 to 5/11/28) in their final year of the lease. But on point (ii) you can see their Car BIK of £1233.70 (will be pro rata) will increase to £4,317.95 (again pro rata) in 2028/29. Now with personal allowances fixed at £12,570 from now until April 2028, the amount this person can earn tax free will dimmish each each tax year.
3) Road tax.
Will kick in on 1/4/25 for all cars registered after that date. Summary :
- Zero emission cars will have the lowest first year rate at £10 until 2029-30.
- Rates for cars emitting 1-50 g/km of CO2 (mainly plug in hybrid vehicles) will increase to £110 for 2025-26.
- Rates for cars emitting 51-75 g/km of CO2, including plug in hybrid vehicles, will increase to £130 for 2025-26.
- All other rates for cars emitting 76 g/km of CO2 and above will double from their current level for 2025-26. These changes will apply from 6 April 2025.
Our verdict - The gap in price continues to increase between each fuel type – it will hit personal leasing more, especially for high performance cars eg a BMW M4 will increase from £2,340 per annum to £4,680 per annum – that will see a huge increase in monthly personal contract hire rentals. Where it also hits is current leased vehicles where many funders will be issuing ancillary charge invoices for the differences in the increased road tax – this will apply to both businesses and individuals, I think high CO2 personal leasing clients are in for a shock!
4) Double Cab Pick Up's.
The double cabs (over 1 tonne payload) will now be classified as a company car, this will be for corporation tax from 1/4/25 and for company car tax if ordered after 6/4/25 – you can read more here - Pick Up's ordered after 6/4/25 treated as company cars
Our verdict – the Conservative Government did this in 2023 but did a huge U-Turn within 2 weeks after the backlash from construction and farming industries in particular, could the U-Turn happen again? I don’t think so, this will see a huge decline in double cab diesel pick up sales, another part of the campaign to reduce CO2 and NOx emissions in the UK. A Ford Ranger, with a list price of circa £50,000 and CO2 of 170g/km + , would fall into the 37% bracket, creating a BiK of around £18,500 a year, meaning an employee will pay company tax of £7,400 a year (or £616.66 per month) for a 40% taxpayer or £3,700 a year (or £308.33 per month) for a 20% taxpayer. So if you need these vehicles, get your diesel pick up’s ordered before 31/3/25. Company class 1a will also move from £594.00 (based on current P11D value of £3950 at 15.0%) to £2,775.00 per vehicle! It is fine to 'order' a vehicle but retain evidence of this.
Final thoughts - above are the main costs that I have discussed, it was a tough budget for all users of motor vehicles, it will accelerate the move to full electric cars, we will see more plug in hybrid pick up's......but they won't last long either due to the big jump in PHEV tax percentage rates. Even personal lease clients will be hit with higher rentals if they don't take a lower CO2 car.