Gordon Brown’s 2007 budget continued to hit the motorist hard under the guise of protecting the environment. The key point for most will be the increase in Band G VED to £400.
- An increase in fuel duty rates of 2 pence per litre (ppl) from 1 October 2007, and increases in the next two years of 2ppl and 1.84ppl respectively;
- Announcing car vehicle excise duty rates for the next three years, including rates for the most polluting cars rising to £400 and rates for clean cars in band B falling to £35;
- A review to examine the vehicle and fuel technologies which over the next 25 years could help ‘decarbonise’ road transport;
- A package of measures to support biofuels including extending the 20 pence per litre biofuels duty differential to 2009-10;
- An increase of 2 pence per litre (ppl) in main fuel duty rates this year, deferred until 1st October 2007; with increases of 2ppl in 2008-09 and 1.84ppl in 2009-10;
- An increase of 2 pence per litre in rebated oils duties, also deferred until 1st October, to maintain the cash differential with main rates. Rebated oils rates will then rise by the same proportions as increases in main fuel duty rates in the subsequent two years; and
- That the Government will maintain the Compressed Natural Gas differential with main fuel duty rates in 2009-10, and will decrease the Liquefied Petroleum Gas differential by a further 1 pence per litre, in line with the Alternative Fuels Framework. Changes will be made to both rates in 2007-08 and 2008-09 in line with previous Budget commitments.
Budget 2007 announces that:
- The current 20ppl duty differential will be extended to 2009-10;
- The duty incentive for biogas will remain at least at its current level until 2011-12, providing five-year certainty instead of the current three years;
- The Government will move forward with the proposed Enhanced Capital Allowance for the cleanest biofuels plant and will introduce a payable enhanced capital allowance for companies not in taxable profit to ensure that both profit making and loss making firms have an incentive to invest in the cleanest biofuels plant; and a 2% company car tax discount for E85 company cars (which run on high blends of biofuels) will be introduced from April 2008.
Vehicle Excise Duty (VED)
As with fuel duty rates, the Government today announces VED rates for this year and the next two years to further sharpen environmental signals to motorists to purchase more fuel efficient vehicles, including:
- Raising the rate for the most polluting cars (band G) to £300 in 2007-08 and £400 in 2008-09; and reducing the rate for low carbon band B cars to £35 in 2007-08, with that rate then frozen for the subsequent two years;
- Raising the rates for graduated bands C-E, cars registered before 2001 and all light goods vehicles by £5 in each of the next three years; and raising the rates for graduated band F by £10 in 2007-08, then £5 in each of the subsequent two years;
- In 2007-08 only, freezing the rates for motorbikes in the lower band with higher bands increasing by £1-£2; and freezing VED rates for Heavy Goods Vehicles (HGV), Special Types Vehicles, Combined Transport Vehicles and all vehicle categories that are linked to the basic goods rate; and
- Aligning the VED rates for petrol and diesel cars as the differential in nitrogen oxides and particulate matter emissions for new cars is expected to fall close to zero once Euro V and VI emission standards become mandatory.
Changes to this year’s VED rates take effect from 22 March 2007. All changes in subsequent years take effect from licences commencing 1 April in the respective year.
Company Car Tax (CCT)
Budget 2007 announces that Company Car Tax rates and thresholds will be frozen for 2009-10. The Company Car Fuel Benefit Charge multiplier will remain frozen at £14,400 for 2007-08.
All fuel duty rate changes will take effect from 1 October 2007.
Pence per litre (unless stated)
Old duty rate
New duty rate
Ultra-low sulphur petrol/diesel
Liquefied petroleum gas used as road fuel
12.21p per kg
+ 4.28p per kg
16.49p per kg
Natural gas used as road fuel
10.81 per kg
+ 2.89p per kg
13.70p per kg
Rebated gas oil (red diesel)
Vehicle excise duty for Private and Light Goods Vehicles
Pre-graduated VED (registered before March 2001)
£ per year
1549cc and below
Graduated VED for Private Vehicles (registered from March 2001)
£ per year VED band
Alternative Fuel cars
100 and below
101 to 120
121 to 150
151 to 165
166 to 185
186 to 225
226 and above
*for new cars registered from 23 March 2006
Vehicle excise duty for Light Goods Vehicles (registered from March 2001)
£ per year
Euro IV incentive rate*
*for Euro IV compliant vans registered between 1 March 2003 and 31 December 2006
Vehicle excise duty for motorcycles
£ per year
150cc and below
Vehicle excise duty for motorised tricycles
£ per year
150cc and below
Changes to VED rates will take effect from 22 March 2007.