Experts are warning against the “haphazard” removal of electric and plug-in hybrid vehicle incentives, following further adjustment to fleet tax breaks as part of the 2025 Budget.
Businesses are critical for the UK’s plug-in hybrid (PHEV) and battery-electric vehicle (BEV) market, accounting for around 80% of registrations across both, according to the latest Department for Transport data. A large share of that volume is bought by leasing companies, which supply them to business fleets.
However, the Budget stopped short of offering long-awaited support for leasing companies. Businesses purchasing vehicles and charging points outright can deduct up to 100% of the cost from their gross profits, which in turn reduces their corporation tax bill. However, this excludes vehicles that are bought to be leased.
From January 2026, the Treasury will extend this to leased assets, enabling companies to add 40% of the purchase cost to their balance sheet and claim tax relief. Although this still excludes cars, Toby Poston, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said it’s a step in the right direction.
“After a campaign from the BVRLA and industry partners over multiple years, working across government, it is encouraging to see that the Treasury has finally begun to acknowledge the sector’s value,” he said. “That acceleration can be turbocharged if we see a greater commitment from the Treasury, extending full expensing to leasing across cars and vans.”
Other car fleets fared better. Last year’s Autumn Budget took aim at Employee Car Ownership Schemes (ECOS), which enable employers to sell cars to staff – often at a discount and with short, mileage-limited contracts – then resell them. As this transfers ownership to the driver, they are exempt from company car tax.
The Treasury had planned to close that “loophole” and “level the playing field” in April, bringing cars that are not registered to employees, have restricted private usage or a set buyback period into the company car tax regime – a move that, the Treasury said, will affect 76,000 taxpayers.
Subsequently postponed to October 2026, this change has been delayed by the Budget until April 2030, with a 12-month transition period for cars that are already on the road when it comes into force.
As manufacturers and fleets face mounting pressure to electrify, one industry insider – who asked not to be named – stressed that consistency is vital as plug-in vehicle incentives are wound down.
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