Spring Statement 2025 - What We Know So Far
Key Insights
NICs are rising from 13.8% to 15%, with the employer contribution threshold dropping from £9,100 to £5,000. EV car schemes reduce employee taxable income, and employer NICs.
BiK for EVs is rising from 2% to 3% in April - and will continue to rise to 9% in 2029/30. This rate is flat for all EVs. The highest BiK rate for traditional vehicles is still 37%.
EVs will start paying VED: £10 in year 1, £195 in year 2 onwards. EVs will not attract a ‘showroom tax’, but will be subject to ‘luxury car tax’ of £425.
Showroom tax (year 1 VED) for petrol and diesel cars is doubled, with a maximum rate of £5,490.
In a landscape of evolving tax regulations, the upcoming changes to National Insurance contributions, Benefit-in-Kind rates, and vehicle taxation are reshaping how businesses approach employee benefits and compensation. These adjustments have significant implications for organisations and their workforce across the UK. In this article - we will show you what we know so far, and what to be aware of as we approach the Spring Statement announcement.
Why These Changes Are Happening
The Spring Statement - introduced by Rachel Reeves - will implement several key fiscal changes aimed at balancing government finances while addressing environmental priorities. For businesses, these adjustments represent both challenges and strategic opportunities, particularly in how they structure employee remuneration and benefits.
Who Is Affected
These tax changes impact multiple stakeholders throughout the business ecosystem:
Employers of all sizes face increased National Insurance contribution rates and lower thresholds.
HR and finance departments must navigate new compliance requirements and cost structures.
Employees considering company vehicles will experience different tax implications based on their vehicle choice.
Fleet managers need to reassess the financial viability of different vehicle options - particularly when it comes to choosing traditional vehicles over electric.
Despite these adjustments, salary sacrifice schemes - particularly those for electric vehicles - continue to offer compelling advantages. For businesses looking to mitigate the impact of rising National Insurance costs, these schemes represent an increasingly attractive option that can reduce tax burdens for both the employer - and employee - while supporting sustainability goals.
National Insurance Changes
The most notable change in Rachel Reeves’ Spring Statement that will affect businesses is focused around National Insurance - with National Insurance Contributions (NICs) rising from 13.8% to 15% in April.
In addition, the threshold at which employers will begin making NICs will be lowered from £9,100 to £5,000 - leading to a larger tax bill for businesses. Currently, employers pay NI at 13.8% on a worker’s earnings above £9,100 a year or £175 a week.
| NIC Rate | On Earnings Above | NIC Paid on £40,000 Salary | |
|---|---|---|---|
| Pre-Budget | 13.80% | £9,100 p/a | £4,264 |
| Post-Budget | 15% | £5,000 p/a | £5,250 |
| The Difference | +1.2% | -£3,900 p/a | +£986 Tax Paid. |
Businesses should prepare for the adjustments to employer contributions, which could influence decisions about compensation packages and benefits offerings, including salary sacrifice schemes.
On the other hand, the rising NICs present an opportunity to businesses looking to reduce their tax burden by providing a salary sacrifice car scheme - since salary sacrifice costs come from gross wages, reducing the eligible employees’ gross salary once the cost of the lease is deducted. This, in turn, reduces taxable income for both employer and employee - at no net cost to the employer.
Meanwhile, salary sacrifice schemes like The Electric Car Scheme offer several benefits, including improved employee retention, enhanced financial stability and satisfaction for employees, stronger company ESG credentials, and a competitive edge in attracting new talent.
We will continue to keep track of the updates around the Spring Statement National Insurance changes - and will keep you updated once the final announcement has been made.
Benefit-in-Kind (BiK) Changes
Benefit-in-kind (or BiK) is a tax paid by employees who receive benefits in addition to their salary. If you lease a car through a salary sacrifice scheme, you will have to pay a BiK contribution.
Every car has a BiK percentage banding. This is based on CO2 emissions, and the P11D value, or list price of the car. This price includes VAT and extras.
Benefit-in-Kind tax is going to continue heavily favouring electric cars despite its planned increase. Rising from 2% to 3% for EVs in April, BiK will affect drivers that lease their cars through salary sacrifice schemes - increasing their lease costs slightly. Despite this, EV BiK will remain flat across all types of electric vehicles - meaning that drivers of more expensive cars will not be paying a higher percentage rate.
BiK Rates for EVs
| Year | 2024/25 | 2025/26 | 2026/27 | 2027/28 | 2028/29 | 2029/30 |
|---|---|---|---|---|---|---|
| BiK % (EV) | 2.00% | 3% | 4% | 5% | 7% | 9% |
Compared to petrol or diesel cars, which have a maximum BiK rate of 37% depending on the specific vehicle - drivers choosing to go electric following these changes could stand to save significant amounts of money on their leases.
For example, a higher-rate taxpayer driving a petrol BMW X5 faces an annual BiK tax of approximately £10,166, while the electric BMW iX attracts just £560.64 - a difference of over £9,600 per year. Even for more affordable models like the Mini Cooper, choosing the electric version results in BiK tax savings of nearly £2,700 annually. More on that in our previous article.
How to Calculate Your BiK Tax
To calculate how much BiK your lease or company car will attract, multiply the P11D value of your car by its BiK percentage band. Then, multiply that by your tax band, eg - 20% or 40%. This will give you the annual tax, which you can divide by 12 to get a monthly figure.
For example, a higher-rate (40%) taxpayer driving a Mini Cooper Electric Hatchback will pay 3% BiK on a car worth £26,840. To calculate annual BiK for 2025/25, use the following calculation:
£26,840 x 3% x 40% = £322.08 annually, or £26.84 a month when divided by 12.
Road Tax (VED) Changes
From April 1, 2025, road tax on new petrol, diesel, and hybrid cars will double for vehicles emitting more than 76g/km CO2, significantly affecting their on-the-road price in the first year:
Cars emitting more than 255g/km CO2 will see first-year tax rise from £2,735 to £5,490
Vehicles emitting between 91-255g/km CO2 will face doubled rates
Low-emission hybrids (50-75g/km CO2) will pay up to £130
Ultra-low emission vehicles (0-50g/km CO2) will pay £110
New electric cars, previously exempt, will pay a nominal £10 first-year rate
After the first year, all vehicles will move to the standard rate - rising from £190 to £195 in April 2025. For electric vehicles registered between April 1, 2017, and March 31, 2025, the standard £195 rate will apply, while early adopters with EVs registered before March 31, 2017, will pay just £20 annually.
This means that EV drivers buying a new electric car could save substantially in their first year road tax - as there is no ‘showroom tax’ for EVs, and EVs will continue to attract the lowest tax rate despite these changes.
You can learn more about the impacts of the Spring Statement tax changes on drivers here.
VED Impacts on Car Leases
Drivers who lease their car through schemes like salary sacrifice typically have their tax covered by the leasing company - so it is factored into the drivers’ monthly bill. Drivers that lease an electric vehicle will not see substantial changes to their bill as a result of this tax increase.
On the other hand, drivers leasing petrol and diesel cars are likely to see increased prices across all new leases, as their lease provider absorbs the added cost. This makes switching to an electric car an attractive option for reducing your monthly bill - especially when ongoing fuel and upkeep costs are factored in.
Luxury Car Tax
The luxury car supplement - aka ‘expensive car supplement’ - (for vehicles priced over £40,000) is increasing from £410 to £425 annually, payable for five years from the second year of ownership. This is in addition to the standard VED rate, bringing the total annual cost to £620 for years two through six - amounting to £3,100 over the five-year period.
Importantly, electric vehicles will no longer be exempt from this supplement, meaning that many EVs (with the average price exceeding £40,000) will now be subject to this additional tax.
However, even with these changes, luxury EVs still offer substantial tax advantages over comparable petrol and diesel models. For instance, the tax burden for a BMW iX (electric) is approximately £990 in the first year, compared to over £16,000 for a petrol BMW X5.
Why Salary Sacrifice Still Makes Sense for Businesses
Despite these tax changes, salary sacrifice schemes remain an extremely attractive option for businesses looking to provide employee benefits while managing costs.
Significant Tax Savings
Even with the new tax regime, electric vehicles offer substantial savings in BiK taxes and first-year VED compared to petrol and diesel alternatives. These savings can be passed on to employees through a salary sacrifice scheme - saving the employee a further 20-50% on the cost of the car.Environmental Commitments
With the ban on new petrol and diesel cars planned for 2030, companies can demonstrate their commitment to sustainability by encouraging the adoption of electric vehicles through these schemes.Additionally, running an EV salary sacrifice car scheme can reduce a company’s environmental impact - further aiding it in meeting its ESG objectives at net-zero cost.
Employee Retention
Attractive benefits packages that include affordable access to electric vehicles can help businesses retain talent in a competitive job market.Cost Predictability
Salary sacrifice car schemes provide employees with predictable transportation costs, important during periods of tax changes and economic uncertainty.In addition, employees can make further savings in addition to 20-50% offered by salary sacrifice by opting for a used, or nearly-new electric car. Doing so can significantly reduce the cost of their lease, and it remains a very popular choice amongst drivers choosing an EV through The Electric Car Scheme.
Reduced NI Contributions
Employers can benefit from lower National Insurance contributions on the sacrificed portion of salary, offsetting some of the increases from tax changes by leveraging a salary sacrifice scheme, which reduces the employees’ gross income.
Is the Spring Statement different from a Spring Budget?
The Spring Statement, also known as the “mini-budget”, is one of two announcements made by HM Treasury to Parliament. This is done after the publication of economic forecasts - with the second such event being the Autumn Statement, presented later in the year. Both usually involve speeches by the Chancellor, in the House of Commons.
Whereas a budget is designed to outline future plans, based on new policies adjusting for projections, and past performance of the economy - a statement serves as a “check-in” to address the government’s priorities in the coming six months. Changes to policy can still be made - as seen above - but they do not present a radical step-change from the overall status-quo.
In 2020, the Spring Statement was upgraded to a full budget, after the cancellation of the Autumn 2019 Budget announcement. In 2021, the Spring Statement was also replaced by a full budget.
Conclusion
The key takeaway is clear: while tax rules evolve, the fundamental value proposition of electric vehicle salary sacrifice remains strong - offering a rare win-win-win scenario for employers, employees, and environmental objectives alike.
While the tax landscape is changing, electric vehicle salary sacrifice schemes remain a compelling proposition for forward-thinking businesses.
Despite increases in National Insurance contributions, BiK rates, and the introduction of modest road tax for EVs, the comparative financial advantage of electric vehicles over traditional combustion engine cars continues to be substantial. For businesses concerned about rising employer NICs, implementing an EV salary sacrifice scheme offers a pragmatic solution that reduces tax liability while providing valuable employee benefits.
The numbers speak for themselves: potential BiK tax savings of up to £9,600 annually for premium vehicles, significantly lower first-year road tax, and reduced ongoing costs. Even with the gradual increase in BiK rates planned through 2029/30, electric vehicles will maintain their tax-advantaged status.
Are you considering launching an electric vehicle salary sacrifice scheme for your business? Get in touch with us to see how we can help you launch in the upcoming tax year.
Last updated: 11.03.25
