The UK’s electric vehicle (EV) market is facing instability due to sudden and inconsistent changes to government incentives, particularly those affecting business fleets. Recent adjustments announced in the 2025 Budget have left industry experts and leasing companies warning about the potential damage to consumer confidence.
Business Fleets Drive EV Demand
Businesses currently represent the vast majority (around 80%) of EV and plug-in hybrid vehicle (PHEV) registrations in the UK, according to the Department for Transport. This demand is largely driven by leasing companies, which supply vehicles to corporate fleets. The current tax system allows businesses that purchase vehicles and charging infrastructure outright to deduct 100% of the cost from their profits, reducing their tax burden. However, this benefit has historically excluded leased vehicles, creating a disparity.
Delayed Tax Relief for Leased Vehicles
The Treasury has announced plans to extend full expensing to leased assets starting in January 2026, allowing companies to claim 40% of the purchase cost as tax relief. While welcomed as a step forward by industry groups like the British Vehicle Rental and Leasing Association (BVRLA), this still leaves cars and vans out of the immediate benefits.
“After years of campaigning, it’s encouraging to see the Treasury finally acknowledge our sector’s value,” says Toby Poston, CEO of BVRLA. “However, we need full expensing extended to all leased vehicles to truly accelerate EV adoption.”
Employee Car Ownership Schemes Under Review
Another area of change involves Employee Car Ownership Schemes (ECOS), which allow employers to sell cars to staff at discounted rates with limited mileage contracts. These schemes have been criticized as a tax loophole because drivers avoid company car tax by taking ownership. The Treasury initially planned to close this loophole in April 2024, impacting approximately 76,000 taxpayers.
However, the closure has been repeatedly delayed: first to October 2026 and now to April 2030, with a 12-month transition period for existing vehicles. This further prolongs uncertainty for businesses and employees reliant on these schemes.
Why This Matters
These incentive shifts matter because consistent, long-term support is crucial for EV adoption. Businesses make fleet decisions years in advance, and unpredictable tax policies disrupt investment. The UK risks falling behind other countries that offer clearer incentives for electric vehicles.
The delays also raise questions about the government’s commitment to its net-zero targets, particularly as the automotive industry transitions towards electric mobility. The EV market is sensitive to policy changes, and haphazard adjustments erode confidence among both businesses and consumers.
The UK EV sector needs stable incentives, not sporadic shifts, to maintain momentum and ensure a sustainable transition to zero-emission vehicles.
