The 2024 Autumn Budget introduced a series of changes that will have a significant impact on the automotive industry. From changes to Employee Car Ownership Schemes (ECOS) and the treatment of double cab pick-up vehicles to the headline-grabbing hikes in Employers’ National Insurance Contributions (NIC).
Below, CP’s Automotive team has taken a closer look at the changes – and what they mean for your business.
EMPLOYEE CAR OWNERSHIP SCHEMES (ECOS)
A major shift announced in the Budget is the government’s decision to end what it describes as ‘contrived’ Employee Car Ownership Schemes (ECOS), which were being used by some to circumvent company car tax.
Under the current ECOS arrangements, employees can acquire vehicles in a way that avoids the company car benefit in kind rules, potentially leading to tax advantages for both employer and employee.
The new rules, announced to come into effect from 6 April 2026, aim to close these loopholes. We’re waiting now for the government to publish further details about the proposed changes to find out how, and when we have those, we’ll bring you up to speed.
If you’re a business offering ECOS, it must be planned for carefully to ensure compliance with existing tax legislation. If rules aren’t followed or the scheme hasn’t been implemented correctly, HMRC could deem the vehicles fall within the company car benefit in kind rules, creating large tax and NI increases for the employer and employee.
We’ll issue further details on the ECOS changes when they’re available, and if you have any questions in the meantime, don’t hesitate to reach out.
DOUBLE CAB PICK-UP VEHICLES
Another area set to change is the treatment of double cab pick-up vehicles for tax purposes.
Currently, double cab vehicles with a payload of 1,000kg or more can be treated as vans for benefit in kind purposes, and a double cab pick-up with a lighter payload is treated as a car, bringing significant tax advantages.
From 6 April 2025, this guidance will be replaced, and whether such vehicles are vans for benefit in kind purposes will rest on the correct application of the ‘primary suitability’ test.
This means that if a double cab pick-up doesn’t have a “clear predominant suitability for carrying goods”, it will no longer qualify as a van for benefit in kind purposes. Instead, it will be treated as a company car, resulting in higher costs for the employee and employer. This change is expected to impact the majority of double cab pick-up vehicles.
For employers who have already purchased, leased or ordered double cab vehicles before 6 April 2025, transitional arrangements will apply. However, this is only until the earlier of the disposal or lease expiry, or 5 April 2029.
If your business provides double cab pick-up vehicles to employees, you should start planning ahead now for the cost implications of this change, as it could lead to substantial tax increases.
EMPLOYERS’ NATIONAL INSURANCE CONTRIBUTIONS (NIC)
One of the biggest headlines from Rachel Reeves’ Budget was the increase in Employers’ national Insurance Contributions (NIC).
From April 2025, the rate will increase by 1.2% to 15%. This will affect businesses across all sectors, automotive included.
The Budget also announced a reduction in the secondary threshold for NIC, from £9,100 to £5,000. This means more earnings will be subject to Employers’ NIC, which could increase the NIC bill for employers by up to £615 per employee, per annum, on top of the 1.2% rate increase.
The Chancellor also announced an increase in the Employment Allowance, from £5,000 to £10,500. This means around 865,000 employers won’t pay any NIC next year, benefitting some smaller businesses.
WHAT SHOULD YOU DO?
The changes introduced in the latest Budget reflect a continued focus on tightening tax rules and ensuring benefits are aligned with their intended purpose.
In the automotive industry, careful planning around the points we’ve mentioned above and staying informed about future developments will be key to navigating these changes successfully.
With their arrival set for April 2025 and 2026 respectively, there’s still time to prepare your business and stay one step ahead. We’ll be publishing further updates as and when they’re released, and if you’d like to find out more about how these changes could affect your position, get in touch.
