Chancellor of the Exchequer George Osborne delivered his sixth Budget speech today (Wednesday, March 18, 2015). It was the Chancellor’s final Budget Statement before the country goes to the polls in the May 7th general election.
The annual financial statement was the last chance for the Conservative and Liberal Democrat Coalition Government to announce vote-winning policies before the election. Parliament will be dissolved at the end of March for the election campaign to take place. Opinion polls suggest the general election result is too close to call and point to another hung Parliament. If that is the case, and the Labour Party forms a Coalition with other parties, then there is the likelihood of an ‘emergency Budget’ being held in June - just as happened following the 2010 general election.
Below we highlight the Chancellor’s key measures from the spring Budget that will impact on the company car and van sector and wider motor industry.
Company car tax
Company car benefit-in-kind tax rates will increase by three percentage points in 2019-20, the Budget papers reveal. Rates up to the end of 2018-19 were announced in last year’s Budget.
Company car benefit-in-kind tax tables published by HM Revenue and Customs (HMRC) reveal that in 2019-20 a car with CO2 emissions of 0-50 g/km will be subject to a rate of 16% of the P11D value of the vehicle; rising to 19% at 51-75 g/km, 22% at 76-94 g/km up to a maximum of 37% at 165 g/km and above view the latest tax tables). However, the HMRC charts do not align with what the Chancellor told the House of Commons in his Budget speech.
He said: “To encourage a new generation of low emission vehicles we will increase their company car tax more slowly than previously planned, while increasing other rates by 3% in 2019-20.” Yet the HMRC charts reveal no slowing in the increase of company car tax rates on low emission vehicles, those with emissions below 75 g/km, as all rates will increase by three percentage points.
Nevertheless, it is understood that what the Chancellor meant was that rates on company cars in the 0-50 g/km bracket would increase four percentage points in 2018-19, but would then be subject to a three percentage point rise the following year. The Government says it remains committed to reviewing incentives for ultra low emission vehicles in the light of market developments at Budget 2016, to inform decisions on company car tax from 2020-21 onwards.
The planned September 1, 2015 0.54p per litre fuel duty increase has been cancelled. In announcing the move, the Chancellor said the 2015 Budget built on the support provided by the government to motorists over the five years of the Parliament. Mr Osborne calculated that the government will have eased the burden on motorists by £22.4 billion by the end of 2015-16 following the year-on-year freezing of fuel duty. That, he said, equated to a saving of £675 for a typical motorist, £1,400 for a small business with a van, and £21,000 for a haulier.
Due to government action on fuel duty since 2011, by the end of 2015-16 the typical motorist will save £9 each time they fill their tank. By the end of 2015-16, fuel duty will have been frozen for five years, the longest freeze for more than two decades.
Car fuel benefit charge 2015-16
Employees who are in receipt of company-funded fuel used privately will see their benefit-in-kind tax bills rise from April 6, 2015. The Chancellor has announced that the fuel benefit charge multiplier for company cars will increase from £21,700 in 2014-15 to £22,100 in 2015-16. From April 6, 2016 the multiplier will once again increase by RPI.
Van benefit charge 2015-16
The van benefit-in-kind tax charge will increase from £3,090 in 2014-15 to £3,150 in 2015-16, the Chancellor has announced. From April 6, 2016 the charge will once again increase by RPI. However, the Government has confirmed the end of the benefit-in-kind tax exemption status of electric vans from 2015-16, and that full van benefit charge will not apply until 2020/21. The Government has confirmed its Budget 2014 announcement that the charge will be phased in - 20% of the rate paid by conventionally fueled vans in 2015-16, 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 when there will be a single benefit charge applying to all vans. The Government says it will review van benefit charge support for zero emission vans in light of market developments at Budget 2016.
From April 6, 2015 the van fuel benefit charge multiplier will increase from £581 to £594, according to the Budget papers published following the Chancellor’s statement. From April 6, 2016 the multiplier will once again increase by RPI.
Severn River Crossing tolls
The cost of crossing the River Severn is to reduce when the Severn River Crossings pass into public ownership post-2018, the Chancellor has announced. The government says it will abolish Category 2 tolls (small goods vehicles and small buses) and include those vehicles in Category 1 tolls (motor cars and motor caravans). It will also abolish VAT on the charges. The Chancellor said the Severn Crossings carrying the M4 and M48 were a vital link for Wales and the measure would “reduce costs for businesses”. He also called it a “a boost for the drivers of white vans”.
Current toll fees are: Category 1 (cars and motor caravans) £6.50, Category 2 (small goods vehicles and small buses) £13.10, Category 3 (HGVs and buses) £19.60. The Chancellor’s announcement will mean cars, motor caravans, small goods vehicles and caravans will pay £5.40 based on current charges and HGVs and buses £16.30.
The Chancellor committed £100 million for research and development into intelligent mobility, which will focus on enhancing the development of driverless car technology and the systems required to implement and adopt the technology, such as telecommunications. Earlier this year the government announced the launch of driverless car pilot schemes in Greenwich, Bristol, Coventry and Milton Keynes.