Car Tax Changes Under Rachel Reeves Could Skyrocket Costs for Some Drivers—Up to £10,094!

The UK government’s new car tax hikes, led by Chancellor Rachel Reeves, could push costs for some drivers to a shocking £10,094.

Published on
Read : 3 min
Car tax
Vehicle tax Image credit: Shutterstock | en.Econostrum.info - United Kingdom

In a move that could send shockwaves through the UK’s car-owning public, the government’s recent decision to raise car taxes, led by Chancellor Rachel Reeves, is expected to dramatically increase the financial burden on certain drivers. According to a report from GB News, the Treasury hauled in nearly £1.2 billion from Benefit-in-Kind (BiK) payments from company car drivers in the 2023-24 financial year. But that’s just the tip of the iceberg—some drivers could face tax hikes as high as £10,094, particularly those behind the wheel of double-cab pick-up trucks, a category that’s been reclassified for tax purposes. For high-emission vehicles, tax rates will climb sharply, further adding to the growing financial strain on motorists and businesses alike.

The Rise in Taxes for High-Emission Vehicles

Under the new tax overhaul, vehicles emitting more than 165g/km of CO2 are facing increased tax rates. By 2029-30, the government plans to impose a staggering 39% tax rate on the most polluting cars, a decision that’s bound to affect thousands of drivers. For businesses that provide high-emission cars to their employees, this translates into higher operational costs and potentially larger tax burdens.

For companies that have long provided large, fuel-hungry vehicles to employees, these changes mean a hefty increase in overheads. The revised rates not only raise the cost of using these vehicles but could also result in businesses cutting back on their car schemes altogether. This shift will hit hard for those companies that have yet to fully transition to electric vehicles or those that can’t afford to make the switch just yet.

The Surge of Electric Vehicles and Their Impact on Car Taxation

Despite the pain for those driving higher-emission vehicles, there is a bright spot for businesses embracing electric vehicles (EVs). As of the latest tax year, electric cars now make up 41% of all company cars, a sharp rise from 220,000 EVs in 2022 to 340,000 in 2023. This surge is in part due to tax incentives for EVs, which have helped lower the average CO2 emissions of company cars to 56g/km from 71g/km the previous year.

The government’s push to make EVs more accessible has led to lower taxes for electric vehicles, making them more attractive to companies seeking to reduce their carbon footprint. However, businesses that are unable to make the switch to EVs may find themselves saddled with increasing costs as taxes for other vehicles climb. For some, the financial toll could be significant, especially if their existing fleets remain reliant on high-emission vehicles. This dynamic creates a sharp contrast between companies able to access incentives for greener cars and those left struggling with the financial consequences of the shift.

The Reclassification of Double Cab Pick-Up Trucks: A Game-Changer for Many Businesses

One of the most alarming changes in the latest round of tax hikes is the reclassification of double-cab pick-up trucks. These vehicles, which were once categorized as vans, are now officially classified as cars for tax purposes, following a Court of Appeal ruling. As a result, drivers of these pick-ups face a massive increase in their tax bills. What used to be an annual £3,960 tax cost for a pick-up is now set to rise by 154%, reaching as high as £10,094 for some vehicles.

For businesses that rely heavily on pick-up trucks, especially in sectors like construction and agriculture, this reclassification is a serious blow. The increased tax rates will hit companies with tight profit margins hard, potentially leading them to reassess their vehicle fleets and make costly decisions about the future of their operations. Haines and Watts experts have warned, “The reclassification of double cab pick-ups marks a significant shift, particularly for businesses and industries that rely heavily on these vehicles. By staying informed, understanding the new rules, and planning ahead, you can minimize the financial impact and make confident decisions about managing your fleet.”

Leave a comment

Share to...