Rachel Reeves has provided an update on changes to Employee Car Ownership Schemes, which could see thousands of drivers lose crucial car tax reliefs.
The move was announced at this year’s Autumn Budget, with the Chancellor hoping to align company cars more closely with Benefit-in-Kind taxes.
HMRC explained that the measure will impact an estimated 76,000 individuals who currently receive cars through ECOS, who will soon “become liable” for the income tax associated with the benefit.
The Chancellor has revealed these changes will be delayed until 2030 to allow more time for businesses to become acquainted with the rules.
Ms Reeves told the House of Commons: “I will reform our motoring taxes. I am providing support to boost our British car industry to increase the threshold for the Expensive Car Supplement from £40,000 to £50,000, saving over a million motorists £440 a year.
“Providing £1.3billion a year for the Electric Car Grant, extending it to 2030 and taking total funding to £2billion, as well as delaying changes to the Employee Car Ownership Schemes.”
The Government previously announced it would bring Employee Car Ownership Schemes into scope of the Benefit in Kind rules from April 6, 2026.
However, to allow the sector more time to prepare for and adapt to this change in treatment, the Treasury revealed that its implementation will be delayed to April 6, 2030, with transitional arrangements until April 2031.
On top of delays, the Budget also revealed changes for plug-in hybrid electric vehicle taxes, with the Government set to introduce a temporary Benefit-in-Kind tax easement from January 1, 2025, to April 1, 2028.
Prior to the Budget, industry experts warned that the impact of removing the scheme could be severe.
The Society of Motor Manufacturers and Traders detailed how abolishing these schemes would undermine recent Government support for automotive growth and push towards electric vehicles.
The changes will come into effect in October 2026
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GETTYMike Hawes, SMMT Chief Executive, condemned the proposals, stating: “The Government has backed the UK automotive sector with EV incentives and global trade deals, helping drive growth and encourage decarbonisation.”
He warned that scrapping ECOS would “undermine that progress, penalising workers, reducing Exchequer income and putting green investment at risk”.