Lease rental costs are set to rise with the arrival of the new financial year.

New Government legislation for taxation will kick-in on 1 April – specifically the removal of first-year allowances for leasing firms – bringing with it a swathe of measures that will hit fleets in the pocket. BusinessCar contacted the UK’s five-largest leasing firms to get their take on the new rules.

Paul Lippitt, principal consultant at Lex Autolease, said: “The removal of the 100% first-year allowance. is likely to result in an industry-wide increase in rental rates. We are building this into our lease costs and we expect our competitors will do the same.”

Paul Hollick, sales and marketing director at Alphabet, said the legislation change would “equate to a roughly £5 per month increase on a sub-110g/km CO2 car”.

Leaseplan’s specialist consultant for funding and tax, Mike Brazel, expected more: “Typically, a bread and butter vehicle on a three-year cycle – say a Golf or a BMW 1-series – is going to rise by maybe £12-£14. Put yourself in something like a BMW 5-series and it could be more than that.”

A spike in prices from April has been predicted by some, but in reality fleets may already be feeling the pinch of higher rental costs, as several leasing companies have already hiked their prices in advance of the changes.

Brazel explained: “I know of organisations that made the change from the beginning of this tax year.”

Meanwhile Lippitt said: “We expect the majority of leasing companies will have already factored in this change.”

Brazel said Leaseplan would be building the hikes into its pricing model but would also be taking a tax loss on vehicles delivered after 1 April. “That disadvantage is only in existence for two years because everybody will lose first-year allowances from 2015,” he said.

Of greater concern, according to Brazel, is the change to the emissions-based writing-down allowance: “The big one is the 130-160g/km change. The best part of 40% of the market will suffer from a significant increase in rental costs if you don’t do something about your policy. “

You’re also starting to pick up leasing disallowances, but this is easy to avoid: just stop people from picking a car over 130g/km with a policy.”

Lippitt cited “alternative funding methods” as a way for companies to soften the blow of tax hikes.

“Businesses looking to acquire a number of vehicles in the sub-96g/km category could benefit from switching to a contract purchase funding model, as they can continue to claim 100% capital allowances on vehicles acquired after April 2013,” he said.

Arval’s only comment was that it was “still waiting to see how the legislation implements itself”, while ALD Automotive did not respond to BusinessCar’s request for comment.