Carmakers say Rachel Reeves’ plan to tax worker car possession schemes will backfire — reducing gross sales, jobs and Treasury income.
Britain’s main carmakers have warned {that a} Treasury plan to impose firm automobile tax on worker automobile possession schemes (Ecos) might price the Exchequer £500 million in misplaced income and threaten 1000’s of producing jobs.
The Society of Motor Producers and Merchants (SMMT) stated the proposed tax modifications, on account of take impact in October 2026, would “critically impression” new automobile gross sales, penalise staff, and undermine funding within the UK’s transition to inexperienced transport.
The transfer, introduced by Chancellor Rachel Reeves final autumn, would see Ecos autos taxed as advantages in variety — ending their exemption and aligning them with wage sacrifice schemes already topic to firm automobile tax.
Underneath the present system, Ecos permit workers to purchase new automobiles from their employer through a credit score settlement, saving employers and staff hundreds of thousands in Nationwide Insurance coverage contributions. The schemes are particularly in style amongst automobile firm employees, who can drive new fashions at discounted costs for round six months earlier than the autos are bought on as “practically new” inventory.
In response to SMMT evaluation, round 100,000 automobiles are at present offered to staff by means of Ecos every year — roughly 5 per cent of the UK’s new automobile market. The group predicts that determine would collapse to only 20,000 if the tax goes forward, resulting in a £1 billion income loss for carmakers, 5,000 jobs in danger, and a £500 million fall in VAT and car excise responsibility receipts.
The Treasury estimates the change would elevate £275 million in its first yr, falling to £175 million by 2030 because the market adjusts. Nevertheless, business leaders argue the real-world impression can be the other.
Mike Hawes, SMMT chief government, stated: “The Authorities has supported the automotive sector by means of EV incentives and commerce offers, serving to to drive progress and decarbonisation. However scrapping Ecos would undermine that progress — penalising staff, decreasing Exchequer earnings and placing inexperienced funding in danger. At a time when the Price range ought to gas progress, this measure will do the precise reverse. It’s time for a rethink.”
Robert Forrester, chief government of Vertu Motors, beforehand warned that the coverage is “prone to cut back earnings to the Exchequer slightly than enhance it.”
An business insider described Ecos as a “win-win” for staff and producers: “It’s scheme for workers — they get to drive the latest automobiles at a reduction — however the system additionally helps gross sales and the used automobile market.”
In its coverage paper, the Treasury stated: “Personal use of an organization automobile is a beneficial profit, and it’s proper that the suitable tax is paid on it. This measure will guarantee equity with different taxpayers, cut back distortions within the tax system, and reinforce the emissions-based firm automobile tax regime that incentivises zero-emission autos.”
The row comes as SMMT figures present the UK new automobile market grew 0.5 per cent in October, with 144,948 automobiles bought, together with 36,830 electrical autos (25.4 per cent of gross sales) — up from 20.7 per cent a yr in the past.
Petrol fashions remained dominant, accounting for 44.4 per cent of gross sales, down from 50.5 per cent final yr. The figures observe the launch of the federal government’s new electrical car grant, providing as much as £3,750 off the price of new EVs.
The Treasury declined to remark additional.
