Leasing companies are urging the Chancellor to use next week's Autumn Budget to address two pressing issues in the company car tax system, warning that the UK's electric vehicle market needs stronger support amid fierce competition between manufacturers.

A new report from the British Vehicle Rental and Leasing Association (BVRLA) points to a persistent gap between retail demand for new and used electric cars and the much stronger demand seen through company car and salary sacrifice schemes, which benefit from favourable Benefit-in-Kind (BiK) tax rates.

Company cars are taxed on a CO2-linked percentage of their list price. For 2026/27, electric vehicles sit at just 4%, plug-in hybrids up to 16%, while even the cleanest petrol and diesel cars face at least 26%. This gap has fuelled a sharp rise in uptake: HMRC data shows 920,000 people paid BiK on a company car in 2024/25, up 200,000 from 2020/21. Of these, 467,000 drive electric cars and 220,000 drive plug-in hybrids.

Among BVRLA members, this has driven a 25% increase in combined fleet size over five years to 1.67 million vehicles. Business Contract Hire rose 25% to 986,033 units, while salary sacrifice grew more than tenfold to 285,000 cars, now matching Personal Contract Hire, which fell 8% over the same period. Electric cars make up 90% of Business Contract Hire orders and almost all salary sacrifice orders, compared with just 23% of Personal Contract Hire.

BVRLA chief executive Toby Poston said certainty beyond 2029/30, when the BiK rate for EVs rises to 9%, is essential given that agreements typically run three to four years. He wants the rate held at 9% through 2031/32 and salary sacrifice's tax benefits protected, especially for basic-rate taxpayers.

Meanwhile, manufacturers are locked in what one leasing firm described to the BVRLA as a "bloodbath" for market share, driven by new entrants and pressure to hit Zero Emission Vehicle Mandate targets, currently under review. This has pushed down residual values for ex-fleet cars, though it has also created attractive new deals for private and salary sacrifice customers. Some firms are now holding vehicles for up to seven years to spread losses, fuelling a surge in used leasing stock—up 529% year-on-year for Personal Contract Hire and 168% for salary sacrifice.

Poston also flagged the incoming pay-per-mile eVED tax as a potential barrier needing reconsideration, and proposed taxing used EVs over three years old on just 35% of their original list price, to make electric motoring more accessible and support the growing secondhand market.

Source: Autocar

Before this, we covered: Europe could scrap 2035 petrol and diesel car ban under new emissions deal