Venson warns frozen threshold is adding to whole-life costs
A new report from Jato reveals that almost one million drivers are on track to pay the Government’s ‘expensive car supplement’ this year, as mainstream cars increasingly breach the £40,000 tax threshold[i]. Venson Automotive Solutions warns that a levy designed for luxury vehicles is now affecting everyday fleet choices and driving up whole-life costs.
Despite increases in new car prices, the £40,000 threshold for the ‘expensive car supplement’ – an annual £440 surcharge paid for five consecutive years after the second year of registration – has been frozen by the government since it was introduced in 2017.
Comments Simon Staton, Client Management Director, Venson Automotive Solutions, “When the ‘expensive car supplement’ was introduced in 2017, the average new car cost around £26,000. Today’s average new car price exceeds that, which means the ‘expensive car supplement’ captures many vehicles businesses wouldn’t consider luxury at all. Fleet operators aren’t procuring prestige vehicles, they’re sourcing practical, safe and increasingly well-equipped cars that employees need to do their jobs.”
Venson says a constant challenge for fleet operators is the need to reconsider vehicle specifications to remain below £40,000 or £50,000 for EVs. Selecting a vehicle based on operational need, safety, driver comfort and whole-life-cost will always be the number one priority, but businesses are increasingly having to review trim levels and additional equipment carefully to avoid triggering additional tax liabilities.
As more mainstream vehicles exceed the threshold, avoiding the luxury car threshold is also impacting whole life cost. This is forcing fleets to continually reassess car choice lists to help ensure that an unexpected tax liability does not tip the scales.
Furthermore, the issue is creating a greater need for employee communication. With more drivers potentially exposed to increased costs, employers have an important role in helping employees understand the financial impact of their vehicle choice. Venson’s own research found that a quarter of employees expect their employer to review company car policies and provide greater support in response to rising vehicle taxes[ii].
Simon Staton concludes, “Previous Venson research showed motorists were divided over the ‘expensive car supplement’, but the issue has evolved beyond whether the tax is fair. As average vehicle prices rise, businesses are increasingly questioning whether the threshold still reflects today’s market.
“Despite the additional cost pressures and administrative burden that the supplement brings to fleet however, the company car remains a key tool in recruiting and retaining talent. It’ a careful balance for companies, avoiding additional tax and providing potential new employees with vehicles that match their expectations.”
[i] https://www.gbnews.com/lifestyle/cars/car-tax-expensive-petrol-diesel-electric-vehicle
[ii] https://www.venson.com/news/72-of-business-drivers-concerned-about-april-tax-hikes