How fleet managers can prepare ahead of road taxation changes

Nick Williams, Managing Director of Lex Autolease

Preparing for a financial shift

As the end of electric vehicle road tax exemptions looms, fleet managers face rising costs that could threaten the financial appeal of EVs. Nick Williams, Managing Director at Lex Autolease, explains how businesses can navigate these changes to continue the transition to a sustainable future.

The UK's decision to end electric vehicle exemptions from road tax marks a turning point for the automotive industry, especially for fleet managers who have championed EVs as a cost-effective and environmentally friendly solution. 

With road tax exemptions set to disappear on 1 April 2025, many fleet managers are understandably concerned about the increased costs as the changes could make EVs less financially attractive compared to their internal combustion engine (ICE) counterparts. 

But, the upcoming shift doesn’t have to be a roadblock to sustainable fleet management. By proactively addressing these changes, fleet managers can continue to unlock the benefits of EVs while preparing for future financial realities.

The elimination of tax exemptions is undoubtedly a challenge, but it also presents an opportunity for fleet managers to reassess their strategies and explore ways to mitigate costs. 

As the landscape evolves, there are three key areas managers need to focus on to navigate the new road tax environment more effectively.

The upcoming changes to road tax are not happening in isolation; Benefit-in-Kind (BIK) tax rates, which have been a major incentive for company car drivers to switch to electric vehicles, are also set to increase. 

At present, EVs offer substantially lower BIK rates compared to ICE vehicles, resulting in significant savings for both companies and drivers. But with BIK rates scheduled to rise over the next few years, now is the time for fleet managers to act swiftly and lock in the lower rates while they are still available.

Fleet managers should re-evaluate their current vehicle mix and consider accelerating their plans to transition to electric. This might involve bringing forward the replacement of some vehicles to take advantage of the existing favourable BIK tax rates for EVs. By acquiring new electric models before the tax rates increase, companies can secure lower running costs over the lifetime of the vehicles, providing a buffer against the additional expense that the road tax changes will introduce.

A thorough review of fleet composition should also include a comparison of the total cost of ownership (TCO) between EVs and ICE vehicles. While EVs might appear more expensive upfront, the TCO calculation—factoring in fuel savings, maintenance costs, and tax advantages—often reveals that EVs still come out on top. By taking a holistic approach to TCO, fleet managers can make better-informed decisions about which vehicles to prioritise for electric replacement and which may be better suited to remain as ICE models in the short term.

With the introduction of road tax for EVs, cutting costs in other areas will be essential to offset the additional expenses. One of the most effective strategies for doing this is to optimise the charging infrastructure, ensuring it is both cost-efficient and capable of meeting the fleet's needs. Getting this right will involve addressing the charging requirements for on-site facilities as well as for employees who charge at home or at public stations.

For businesses that provide on-site charging, it is crucial to assess whether the current setup is fit for purpose. This means evaluating the number, placement, and charging speeds of the stations to ensure they are positioned in locations that are convenient and minimise disruption to daily operations.

Companies should also consider future-proofing their charging infrastructure by installing more stations or upgrading to higher-capacity chargers that can accommodate larger batteries and faster charging needs. While this may require an upfront investment, the long-term savings in energy costs and operational efficiency can be substantial.

For employees who work remotely or frequently travel, charging infrastructure optimisation extends beyond the company premises. Encouraging home charging, especially during off-peak times, can help keep costs down. Companies might explore offering incentives or reimbursements for employees who install home chargers, particularly if these are equipped with smart technology. This not only supports cost-efficient energy use but also boosts the likelihood that vehicles will be charged when needed.

Optimising charging infrastructure not only helps to offset the financial impact of road tax changes but also strengthens the overall sustainability of the fleet. A well-planned approach to charging can provide ongoing savings, making the shift to EVs more attractive even as incentives begin to diminish.

Data-driven fleet management is more important than ever in an environment where costs are rising. 

By analysing vehicle usage patterns, fleet managers can make more informed decisions that reduce expenses and improve efficiency. Telematics and fleet management software can provide insight into factors like mileage, driver behaviour, and charging habits, allowing managers to optimise routes, schedule maintenance more effectively, and even determine whether certain vehicles are underutilised.

Understanding these patterns can also inform decisions about which vehicles to prioritise for EV transition and which should remain ICE, based on actual usage and cost implications. This data-driven approach not only helps in adapting to the end of road tax exemptions but also lays a foundation for more efficient fleet management in the long term.

While the end of EV road tax exemptions poses a challenge, it should not deter fleet managers from pursuing sustainable practices. Instead, it should be seen as a call to adapt strategies, improve efficiencies, and make the most of current incentives. The road ahead may be changing, but with proactive planning, fleet managers can ensure that their commitment to sustainability and cost-efficiency remains firmly on track.

If you would like to understand how these changes may impact your business, please speak to your account manager.