Events, News

Budget 2016 and the motorist

Now that George Osborne has delivered his eighth Budget speech, what does it mean for the motorist?

There are a few key items to note that will impact on the company car sector and the wider motor industry as a whole. Company car benefit in kind tax rates up to the end of 2019/20 were already known but the Chancellor did not announce rates for 2020/21 as had been expected. That means that company car drivers will be selecting cars today which they could still be driving in 2020/21 without any knowledge as to what their benefit-in-kind tax bills will be.

However, the small print of the Budget documents revealed that the already announced company car benefit-in-kind tax increases in 2019/20 will raise an additional £315 million for HM Treasury and that increases due in 2020/21 will raise a further £320 million. That suggests that HM Revenue and Customs knows what the rates will be in 2020/21, but has yet to announce them, although it has confirmed that the three percentage point differential between diesel cars and petrol cars will be retained until April 2021.

At Budget 2013, the government committed to review the company car tax incentives for ultra-low emission vehicles in light of market developments at Budget 2016. The Chancellor has now announced that the government has decided to continue to base company car tax on the CO2 emissions from 2020/21.

It will now consult on reform of the bands for ultra-low emission vehicles (below 75 g/km of CO2) to refocus incentives on the cleanest cars. That suggests that rather than a single rate of tax for cars with emissions of 0-50 g/km and for those with emissions of 51-75 g/km as currently there could be a series of graduated tax thresholds.

As announced in last year’s post-general election summer Budget, VED for cars first registered from April 1, 2017 is to change. First year rates of VED will vary according to the CO2 emissions of the vehicle. A flat standard rate of £140 will apply in all subsequent years, except for zero-emission cars for which the standard rate will be £0. Cars with a list price above £40,000 will attract a supplement of £310 on the standard rate for the first five years in which the standard rate is paid. All cars first registered before April 1, 2017 will remain in the current VED system, which will not change.

Fuel duty will be frozen again in 2016/17, saving the typical motorist £75 a year and £270 a year to a small business with a van. By the end of 2016/17 fuel duty will have been frozen for six years. Insurance Premium Tax was increased from 6 per cent to 9.5 per cent in November 2015 and it will rise from October 1, 2016 by a further 0.5 per cent to 10 per cent impacting on vehicle insurance and roadside assistance. The money raised is specifically earmarked to be spent on improving flood defences.

The government says it is making the biggest investment in transport infrastructure in generations and is increasing capital investment in the transport network by 50 per cent over this Parliament compared to the last, investing £61 billion. The government’s long-term approach to improving England’s motorways and major roads is marked in the Budget with the launch of its second Roads Investment Strategy, which will determine the investment plans for the period from 2020/21 to 2024/25.

The Budget also saw the allocation of the £50 million Pothole Action Fund for England in 2016/17, enabling local authorities to fill nearly a million potholes. The government will also provide a further £130 million to repair roads and bridges damaged by Storms Desmond and Eva.

Pushing forward with plans to establish the UK as a global centre for excellence in connected and autonomous vehicles, the government will conduct trials of driverless cars on the strategic road network by 2017, hold consultations this summer on sweeping away regulatory barriers within this Parliament to enable autonomous vehicles on England’s major roads and establish a £15 million ‘connected corridor’ from London to Dover to enable vehicles to communicate wirelessly with infrastructure and potentially other vehicles.

The government has also confirmed that the long-awaited trial of comparative fuel price signs on the M5 between Bristol and Exeter will start this spring to drive fuel price competition and help motorists save money.