Chancellor Rachel Reeves is reportedly considering the abolition of tax breaks for salary sacrifice schemes used by tens of thousands of drivers to lease electric vehicles (EVs).
This move could potentially deal a significant blow to the UK’s push towards widespread EV adoption. The Treasury is reviewing whether to scrap or modify these schemes, which allow employees to lease EVs by paying monthly instalments before income tax and National Insurance are deducted, offering considerable savings.
While the schemes have been credited with bolstering EV sales during a slowdown in new car demand, critics argue that they disproportionately benefit wealthier individuals. The Resolution Foundation, a think tank, has called for the removal of tax breaks for salary sacrifice and company cars, stating that the benefits largely accrue to high earners who can afford new vehicles.
Chancellor Reeves is expected to address these concerns in her first Budget on October 30. In the lead-up to the Budget, Reeves hinted that higher earners would face additional tax burdens, stating that those with the “broadest shoulders will be bearing the largest burden.”
The Financial Impact and Industry Concerns
Officials from the Treasury have been discussing the financial implications of these schemes with members of the British car industry. The abolition of salary sacrifice schemes could save the Treasury up to £100 million, according to estimates. Civil servants have reportedly recommended scrapping the schemes to Ms Reeves and her predecessors, though no decisions have been finalised.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.
