Rachel Reeves is considering scrapping “unfair” tax breaks for workers who buy electric cars, amid claims they disproportionately benefit the wealthy.
The Chancellor is understood to be looking at plans to either scrap or modify workplace salary sacrifice schemes that is used by tens of thousands of drivers every year to lease electric vehicles (EVs)
The schemes, where monthly instalments are taken from employee pay packets before income tax and National Insurance are deducted, are credited with propping up EV sales at a time when demand for new cars has suffered a slowdown.
Officials from the Treasury are understood to have discussed the financial impact of salary sacrifice schemes with members of the British car industry in August.
Civil servants have also suggested abolishing the schemes to Ms Reeves – and her predecessors ahead of previous Budgets – as a way of saving the Treasury up to £100m, The Telegraph understands.
The Resolution Foundation on Thursday called for salary sacrifice and company car tax breaks to be axed, arguing they only benefit “a relatively small number of better-off households who buy new cars”.
Ahead of her first Budget on Oct 30, Ms Reeves has warned that those with the “broadest shoulders will be bearing the largest burden”, suggesting that the Government is preparing for a tax raid on higher earners.
However, car industry bosses warned that removing salary sacrifice tax relief would deal a hammer blow to the shift to EVs at a time when ministers are trying to encourage uptake.
James Court, chief executive of the Electric Vehicles Association, said: “Salary sacrifice is the one government policy remaining that helps working people bridge the upfront cost of EVs.
“Removing it before we reach price parity with new petrol cars would be hugely damaging in achieving our EV sales targets, as well as blow a big hole in our carbon budgets, for which ministers would have to develop a new policy to replace the gap.”
