The 2025 Budget confirms what many in the fleet and salary sacrifice world have been expecting for some time: as electric vehicles move into the mainstream, the way the government raises motoring tax is evolving.
The good news is that, even with the newly announced mileage-based charge, electric company cars and salary sacrifice EVs remain one of the most tax-efficient and cost-effective ways to drive.
The government has confirmed that from April 2028, electric and plug-in hybrid cars will move onto a simple ‘pay-per-mile’ road charge:
For a typical EV driver this works out to about £255 a year – around half the equivalent fuel duty bill for petrol or diesel.
Crucially, this change is several years away, giving fleets and drivers plenty of time to plan and allowing providers to build the costs into future quotations.
For company car and salary sacrifice drivers, EVs remain highly tax-efficient: Benefit-in-Kind rates on electric cars stay far below those for conventional vehicles, and from April 2026 the ‘luxury car’ tax threshold for EVs rises from £40,000 to £50,000, so many popular models will now avoid that surcharge altogether.
This combination of low BiK, rising thresholds and relatively modest mileage charges means EV drivers continue to enjoy a strong tax advantage over petrol and diesel.
Alongside this, the government is putting extra money into the Electric Car Grant and has extended it to 2030, which helps support EV pricing and residual values.
That’s particularly important for fleets and salary sacrifice, where whole-life costs and predictable future values determine how attractive monthly rentals and driver contributions can be.
For fleets, HR teams and drivers, the direction of travel is clear and still very favourable to EVs:
Taken together, even with the new mileage charge, EVs continue to be one of the most cost-effective choices for a company car or salary sacrifice driver, with lower tax, lower fuel costs and a clearer long-term tax framework than ever before.
The 2025 Budget confirms what many in the fleet and salary sacrifice world have been expecting for some time: as electric vehicles move into the mainstream, the way the government raises motoring tax is evolving. The good news is that, even with the newly announced mileage-based charge, electric company cars and salary sacrifice EVs remain … Continued
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