If your business runs vans, cars or a small fleet, you’ve probably found yourself thinking something like:
“Do I stick with diesel? Go electric? Lease? Buy? What’s actually going to be cheaper over the next few years?”
And just when you think you’ve got your head around it, the rules move again.
- Fuel duty gets frozen again (for now).
- Company car tax nudges around.
- And in the background, the government quietly lines up a mileage-based charge for electric vehicles in future.
So how on earth are you supposed to plan?
Let’s break this down in plain English and turn it into something you can make decisions from, rather than just another thing to worry about.
The short version: cheap for now, not forever
Here’s the basic picture:
- Fuel duty (the tax on petrol and diesel) has been frozen again for the near term. Good news in the short run.
- But the government is also preparing a mileage-based charge on electric and plug-in hybrid vehicles from a future date, at around half the petrol fuel-duty rate.
Translation:
- Petrol and diesel are getting a stay of execution on tax rises, but don’t expect that to last forever.
- Electric vehicles (EVs), which have enjoyed a near tax holiday in some respects, will gradually be pulled into the revenue net too.
So if your fleet planning assumes:
You might need to adjust the story.
They’ll likely still be cheaper, but the gap will narrow.
What this means is if you run vans, cars or a small fleet
If you’ve got any of the following:
- A couple of vans on finance
- A few company cars for sales or management
- A small fleet of vehicles for engineers, fitters or reps
- Staff using their own car and claiming mileage
These changes touch you more than you might realise.
They affect:
- Your running costs (fuel, electricity, tax, insurance)
- Your benefit-in-kind (BIK) position on company cars
- Your decision between cash allowance vs company car
- Whether now is the right time to go big on EVs, or whether to phase it
So let’s take each piece one by one.
Fuel duty freeze: good news, but don’t get complacent
The extension of the fuel duty freeze is welcome.
It means:
- No immediate hike in the tax part of every litre of petrol or diesel.
- Some short-term certainty for your fuel costs.
- A little breathing space while everything else (wages, insurance, parts) keeps going up.
But this is not a permanent policy.
From the government’s point of view:
- Fuel duty has been a huge, reliable source of income for years.
- As more people shift towards efficient or electric vehicles, the tax base shrinks.
- So they’ll look for other ways to get the money, which is where the EV mileage charge comes in.
So yes, take the win, but don’t build a 10-year plan assuming fuel duty will be frozen forever.
EV mileage charge: the “free ride” ends
Electric vehicles have had some big advantages:
- Lower fuel cost per mile
- Lower (or zero) road tax
- Very attractive company car tax (BIK) in many cases
- A general sense of “we’re doing the right thing”
The planned mileage-based charge for EVs and plug-in hybrids changes the maths:
- You’ll pay a tax per mile driven, at around half the rate currently paid through fuel duty on petrol vehicles.
- That still makes EVs attractive on a per-mile tax basis…
- but it’s no longer a tax-free free-for-all.
The direction of travel is very clear:
The government will plug the revenue gap created by EVs, one way or another.
So the right way to think is:
- “EVs are probably still cheaper per mile overall, even after a mileage charge,”
- But “I need to plug that into my cost model, not pretend it won’t happen.”
Company cars vs cash allowance: the gap is closing
For years, a lot of directors and senior staff have been given a choice:
- Company car, or
- Cash allowance to run their own car
With petrol/diesel cars:
- BIK on company cars can be expensive.
- So many people preferred a cash allowance and claiming mileage.
With EVs:
- Very low BIK rates have made company electric cars a very attractive benefit.
- Running costs have been low, and tax has been gentle.
As EV-specific charges come in over time, the gap between those choices narrows.
So when you’re planning packages for directors or key staff, you want to:
- Compare total cost to the company over 3–4 years
- Compare after-tax benefit to the driver
- Factor in likely changes to BIK bands, mileage charges and fuel costs
It’s no longer a simple “company EV is always best” rule of thumb, you need to run the numbers for your situation.
The real question: what does this mean for your next vehicle decision?
Let’s make this practical.
If you’re asking:
What should we do about our next van/car/fleet renewal?
Step 1: Be clear about the job of each vehicle
Before we talk tax, ask:
- What is this vehicle actually used for?
- How many miles does it typically do a year?
- Are the routes local, regional or national?
- Is there easy access to charging, or is it mostly on-the-road use?
- Do you need towing, heavy load capacity, or is it mostly carrying people?
EV vs diesel looks very different for:
- A local service engineer doing 80 miles a day around Surrey, vs
- A national sales rep doing 35,000 miles a year up and down the country
One size does not fit all.
Step 2: Build a simple “cost per mile” picture
For each vehicle type, we want to look at:
- Finance or lease cost (monthly)
- Fuel or electricity cost per mile
- Tax elements:
- Fuel duty / EV mileage charge (current and likely)
- Road tax
- Company car tax (BIK) if it’s a company car
- Insurance and maintenance
The aim is not perfection; it’s to get a reasonable, side-by-side comparison:
- Old diesel vs new diesel
- Old diesel vs EV
- Lease vs buy
If we can’t demonstrate, on paper, that one option is clearly more efficient on realistic assumptions, we don’t go all-in on it.
Step 3: Think in phases, not “all or nothing”
A common mistake is thinking:
- “We need to flip the whole fleet to EV now,” or
- “We’re sticking with diesel until we’re forced to change.”
You don’t have to be extreme.
You might:
- Start with one or two EVs in roles where they clearly make sense (local mileage, predictable routes, easy charging).
- Renew some diesels where range and flexibility still matter most.
- Review again in 2–3 years as the tech, tax and charging infrastructure mature.
Fleet evolution works better than fleet revolution.
Step 4: Factor in staff expectations and retention
Vehicles aren’t just a cost line, they’re also part of how people feel about working for you.
Consider:
- For company cars, EVs and plug-in hybrids are often seen as a premium perk now.
- For vans, drivers care about comfort, reliability and range, not sitting panicking at 3% battery on the M25.
- Younger staff can be very tuned into the environmental angle; others may just want whatever is most practical.
Getting this balance right:
- Helps with recruitment and retention
- Reduces grumbling and “range anxiety”
- Makes it easier to implement any charging or usage policies you need
Step 5: Tie it back into your wider tax and cash plan
Your fleet plan shouldn’t sit in isolation.
It should plug into:
- Your 3–5 year cashflow forecast
- Your tax planning, capital allowances, BIK, VAT on vehicles, etc.
- Your growth plans, are you expanding territory, adding new crews, changing delivery models?
Big vehicle decisions are capital allocation decisions.
They’re not just about metal and wheels, they’re about how you deploy cash and borrowing.
Common questions I hear from owners
Let me hit a few FAQs I get from clients.
“Should we rush to EVs now before the mileage charge kicks in?”
No rush, no panic.
- If an EV already makes sense today, fantastic, do it.
- But don’t buy purely because you fear missing out on a window. The tax landscape is changing all the time.
Make each decision on proper numbers, not fear of future headlines.
“Is diesel dead?”
Not yet.
For:
- High-mileage, long-distance work
- Heavy loads
- Poor charging infrastructure areas
diesel may still be the practical choice for a few more cycles.
What’s dead is the idea that you’ll happily run old, inefficient vehicles indefinitely with no tax or policy consequences.
Should we put everything through as company vehicles, or push people onto their own cars with a mileage rate?”
It depends.
You need to weigh:
- Control vs flexibility
- Total cost to the business
- The admin burden
- Staff expectations and fairness
- Tax and NI on benefits vs allowances
A mixed model often works best: company vehicles where branding, control and predictable use matter; allowances where it’s more ad hoc.
The mindset shift: from guesswork to modelling
The worst thing you can do now is:
- Guess
- Copy what someone else is doing
- Choose based purely on the last conversation you had with a salesperson
The best thing you can do is:
- Treat fleet decisions as numbers-based decisions
- Use simple models to compare options before signing anything
- Keep revisiting the plan as the tax and cost landscape evolves
You don’t need a 50-tab financial model. A clear, honest comparison of:
What does this actually cost us per mile, per month, after tax?
puts you miles ahead of most businesses.
How can we help at MDH?
This is exactly the kind of thing where having an accountant who understands both tax and the real world is useful.
If you’re staring at renewal dates and EV brochures and feeling stuck, we can:
- Build a Fleet Cost Model for you
- Compare diesel vs EV vs hybrid
- Lease vs buy vs HP
- Company car vs allowance
- All in: finance, fuel, tax, BIK and maintenance
- Factor in the upcoming changes
- Fuel duty freeze
- Future EV mileage charging
- Company car tax trends
- Capital allowances and VAT treatment
- Turn it into a simple, actionable plan
- Which vehicles to change now, which to keep
- Where EVs make sense first in your business
- How to structure things so you’re not caught out in 3–5 years
If you’d like clarity before you commit to your next round of vehicles, ask us about a Fleet & Company Car Review.
We’ll run the numbers with you so that, whether you go diesel, electric or a mix, you’ll know you’ve chosen the option that’s best for your business, not just the one that sounded good in the showroom.
