George Osborne's fifth Budget speech took place on Wednesday, March 19, 2014. Below we highlight the Chancellor’s key measures that will impact on the company car and van sector and wider motor industry.
The Budget papers set out company car benefit-in-kind tax rates for 2017/18 and 2018/19 and Vehicle Excise Duty rates for the coming years.
Company car tax
The Budget papers set out company car benefit-in-kind tax rates for 2017/18 and 2018/19, while also confirming previously announced rates for the years up to and including 2016/17, which includes the removal of the 3% diesel supplement. View the tax tables for the next three years.
In 2017/18 and 2018/19 the appropriate percentage of list price subject to tax will increase by two percentage points for cars emitting more than 75 g/km of carbon dioxide (CO2), to a maximum of 37%.
However, the Chancellor has changed his mind in relation to previously announced increases in rates for the two lowest thresholds - 0-50 g/km and 51-75 g/km - and altered the differential between those rates and the 76-94 g/km threshold.
In Budget 2013, the Chancellor said that the differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km bands would be three percentage points in 2017/18 reducing to two percentage points in 2018/19.
However, in Budget 2014 he changed his mind and said the differential would be four percentage points and three percentage points respectively. It was, he said, a mechanism through which he could incentivise the take-up of ultra low emission vehicles.
The small print of the Budget papers reveal that the increases in company car tax are forecast to generate an additional £240 million for HM Treasury in 2017/18 and £480 million in 2018/19. The Budget papers also revealed that the differential would reduce further to two percentage points in 2019/20.
The Chancellor added that the Government remained committed to reviewing incentives for ultra low emission vehicles in light of market developments at Budget 2016, to inform decisions on company car tax from 2020/21 onwards.
The Chancellor confirmed his Autumn Statement 2013 announcement that September’s planned 1.6p per litre rise in fuel duty was cancelled. It means that there will be no rise in fuel duty prior to the 2015 general election.
Meanwhile, legislation will be introduced in Finance Bill 2015 to apply a reduced rate of fuel duty to methanol composed of 95% pure methanol and 5% water, to be implemented from April 1, 2015. The rate of fuel duty applied to methanol will be 9.32p per litre. The size of the duty differential between the main rate and methanol will be maintained until March 2024.
The Government says it will review the impact of the incentive alongside the duty incentives for road fuel gases at Budget 2018
Car fuel benefit charge 2013/14
Employees who are in receipt of company-funded fuel used privately will see their benefit-in-kind tax bills rise from April 6, 2014.
The Chancellor has announced that the fuel benefit charge multiplier for company cars will increase from £21,100 in 2013/14 to £21,700 in 2014/15.
From April 6, 2015 the multiplier will once again increase by RPI.
Van benefit charge
The van benefit-in-kind tax charge will increase from £3,000 in 2013/14 to £3,090 in 2014/15, the Chancellor has announced.
From April 6, 2015 the charge will once again increase by RPI.
However, the Government will extend van benefit charge support for zero emission vans to April 5, 2020 on a tapered basis.
For five years until the end of 2014/15 zero emission vans were exempt from benefit-in-kind tax. However, from 2015/16 the charge paid by zero emission vans will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 and 90% in 2019/ 20, with the rates equalised in 2020/21.
The Government says it will review van benefit charge support for zero emission vans in light of market developments at Budget 2016.
Van fuel benefit charge 2013/14
From April 6, 2014 the van fuel benefit charge multiplier will increase from £564 to £581, according to the Budget papers published following the Chancellor’s statement. From April 6, 2015 the multiplier will once again increase by RPI.