Company car demand is predicted to accelerate after benefit-in-kind tax clarity for the next five years was provided by Chancellor of the Exchequer Rishi Sunak in this week’s Budget.

Rishi Sunak holding BudgetThe Budget Statement confirmed that previously announced benefit-in-kind tax rates for 2020/21, 2021/22 and 2022/23 would be implemented as planned and that rates for 2023/24 and 2024/25 would be frozen at 2022/23 rates.

Caroline Sandall, chairman of fleet operators’ organisation ACFO, said: “The freeze in company car benefit-in-kind tax rates for 2023/24 and 2024/25 at 2022/23 levels could provide a significant boost in demand for what remains one of the nation’s favourite employee benefits.

“Company car demand has been hit in recent years by year-on-year increases in benefit-in-kind tax and long-term rate uncertainty. However, the fact that rates are now known for the next five financial years – a full vehicle replacement cycle – gives planning confidence to both fleet decision-makers and company car drivers.”

It was a view shared by Paul Hollick, chairman of fleet industry training organisation ICFM, who said: “With company car benefit-in-kind tax rates now known for a full five-year vehicle cycle, which is the norm for some organisations, the Budget could herald a resurgence of the company car. That’s because many drivers’ decision to opt out of a ‘favourite’ employee perk was driven by tax uncertainty.”

While Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association, said: “Having a roadmap for the future of company car tax up to 2025 removes the uncertainty that we know stifles business decisions.”