Chancellor of the Exchequer George Osborne delivered his fourth Budget speech yesterday (Wednesday, March 20, 2013).

He described his Budget, the subject of a 55-minute statement in the House of Commons, as one that ‘fixed our country’s economic problems’ and one for ‘our aspiring nation’.

Below we highlight the Chancellor’s key measures that will impact on the company car and van sector and wider motor industry.

Company car tax

The Budget papers have confirmed that previously announced changes in company car benefit-in-kind tax up to the end of 2016/17 will go ahead.

However, the Chancellor responded to intensive lobbying, particularly from the Society of Motor Manufacturers and Traders, to deliver tax incentives to support demand for ultra low emission vehicles.

As a result, from April 6, 2015, two new company car tax bands will be introduced at 0-50 g/km CO2 and 51-75 g/km CO2.

The appropriate percentage of the list price subject to tax for the 0-50 g/km CO2 band will be 5% in 2015/16, and 7% in 2016/17.

The appropriate percentage of the list price subject to tax for the 51-75 g/km CO2 band will be 9% in 2015/16 and 11% in 2016/17.

In 2017-18 there will be a three percentage point differential between the 0-50 and 51-75 g/km CO2 bands, and between the 51-75 and 76-94 g/km CO2 band.

In 2018-19 and 2019-20 there will be a two percentage point differential between the 0-50 and 51-75 g/km CO2 bands and between the 51-75 and 76-94 g/km CO2 bands.

Budget papers reveal that the measure is part of a £100 million package to incentivise the purchase and manufacture of ultra low emission vehicles in the UK.

HM Revenue and Customs (HMRC) calculates that a basic rate taxpayer driving a zero emission car with a list price of approximately £28,500 will pay £450 less company car tax in 2015/16 compared to the policy announced in Budget 2012. A higher rate taxpayer will pay £900 less in 2015/16.

Additionally, HMRC calculates that a basic rate taxpayer will pay £470 less than a basic rate taxpayer with a conventionally fuelled car that emits between 115-119 g/km (18% in 2015/16) with a list price of approximately £18,000. A higher rate taxpayer will pay £940 less in 2015/16.

In future years, the Chancellor says that company car tax rates will be announced three years in advance. As a result, company car tax rates for 2017/18 will be announced in the 2014 Budget.

Additionally, the Government says it will review company car tax ‘incentives’ for ultra low emission vehicles in the light of market developments in the 2016 Budget, so decisions on company car tax can be made from 2020-21 onwards.

% of P11D2012/132013/142014/152015/162016/17
PriceCO2 (g/km)CO2 (g/km)CO2 (g/km)CO2 (g/km)CO2 (g/km)
      
0000N/AN/A
51-751-751-750-50N/A
7N/AN/AN/AN/A0-50
9N/AN/AN/A51-75N/A
1076-9976-94N/AN/AN/A
11100-10495-9976-94N/A51-75
12105-109100-10495-99N/AN/A
13110-114105-109100-10476-94N/A
14115-119110-114105-10995-99N/A
15120-124115-119110-114100-10476-94
16125-129120-124115-119105-10995-99
17130-134125-129120-124110-114100-104
18135-139130-134125-129115-119105-109
19140-144135-139130-134120-124110-114
20145-149140-144135-139125-129115-119
21150-154145-149140-144130-134120-124
22155-159150-154145-149135-139125-129
23160-164155-159150-154140-144130-134
24165-169160-164155-159145-149135-139
25170-174165-169160-164150-154140-144
26175-179170-174165-169155-159145-149
27180-184175-179170-174160-164150-154
28185-189180-184175-179165-169155-159
29190-194185-189180-184170-174160-164
30195-199190-194185-189175-179165-169
31200-204195-199190-194180-184170-174
32205-209200-204195-199185-189175-179
33210-214205-209200-204190-194180-184
34215-219210-214205-209195-199185-189
35220+215+210+200-204190-194
36N/AN/AN/A205-209195-199
37N/AN/AN/A210+200+
  • Up to the end of tax year 2014/15 add 3% for diesel cars up to a maximum of 35%
  • For tax year 2015/16 add 3% for diesel cars up to a maximum of 37%
  • In 2016/17 petrol and diesel cars are treated equally for company car tax purposes.

Capital Allowances and the Lease Rental Restriction

Capital allowances are a system that enables companies to offset the cost of assets used in their business against taxable profits.

Lease rental restriction allows the cost of a company car lease to be deducted against taxable profits

In Budget 2012, the Chancellor announced a series of changes to capital allowance emission thresholds and the lease rental restriction (as detailed below), and in this year’s Budget he confirmed they would be implement from April 1, 2013.

April 1, 2013 changes:

  • The 100% writing down allowance (a form of capital allowance) threshold applies to company cars with emissions of 95 g/km and below (2012/13: 110 g/km)
  • The 18% writing down allowance threshold applies to company cars with emissions of 96 g/km-130 g/km (2012/13: 111 g/km-160 g/km) on a reducing balance basis
  • The 8% writing down allowance threshold applies to company cars with emissions from 131 g/km (2012/13: from 161 g/km) on a reducing balance basis
  • Leasing companies no longer able to claim 100% first year writing down allowance on cars with emissions up to 95 g/km instead they are restricted to 18% (0-130 g/km) on a reducing balance basis
  • The 15% lease rental restriction threshold falls to 130 g/km (2012/13: 160 g/km).
  • The new rules are not retrospective so don’t impact on cars bought or leased prior to April 1.
  • However, in this year’s Budget the Chancellor also announced that:
  • The Government will extend the 100% full year allowance – due to end on March 31, 2015 – for a further three years until March 31, 2018.
  • From April 1, 2015, the carbon dioxide emissions threshold at which the 100% allowance applies will be reduced from 95 g/km to 75 g/km.
  • The case for extending the full year allowance for cars beyond April 1, 2018 will be reviewed at Budget 2016 alongside a review of the 130 g/km main rate threshold (18%) with any amendments taking effect from April 1, 2018.

Fuel

The 1.89p per litre (+ VAT) fuel duty increase that was planned for September 1, 2013 has been cancelled.

It means that fuel duty will have been frozen for nearly three and half years, the longest duty freeze for over 20 years, according to the Government.

The Government has calculated that cancelling the duty rise amid concerted pressure from consumer and industry groups will mean it will cost the typical motorist £7 less to fill up their tank every time they visit the pump from next month, and £10 less by the end of the Parliament in 2015.

In addition, a small business could have saved £340 in total over the last two years when compared with previously announced fuel duty increase plans and will continue to save at least that amount annually.

Vehicle Excise Duty

On April 1, 2013, VED rates will increase in line with the RPI, apart from VED rates for Heavy Goods Vehicles, buses and other selected vehicles which will be frozen in 2013/14.

The Government has ruled out plans to make significant reforms to the structure of VED for cars and vans in the current Parliament having previously said that it had been considering changes to ensure that all motorists made a fair contribution to the sustainability of the public finances, and to reflect continuing improvements in vehicle fuel efficiency.

Vehicle Excise Duty from April 1 for cars registered on or after 1 March 2001

VED
Band
CO2 emissions
g/km
2013/14
First year rate*Standard
rate*
AUp to 10000
B101-110020
C111-120030
D121-1300105
E131-140125125
F141-150140140
G151-165175175
H166-175285200
I176-185335220
J186-200475260
K**201-225620280
L226-255840475
MOver 2551,065490

 *Alternative fuel discount 2013/14 £10 all cars

** Includes cars emitting over 225 g/km registered before March 23, 2006

Vehicle Excise Duty for private and light goods vehicles

Registered on or after March 1, 2001 (not over 3,500kg revenue weight) – £220

Euro 4 light goods vehicles registered between March 1, 2003 and December 31, 2006 only (not over 3,500kg revenue weight) – £140

Euro 5 light goods vehicles registered between January 1, 2009 and December 31, 2010 only (not over 3,500kg revenue weight) – £140

Other VED changes

  • The current cut off date of January 1, 1973 for VED exemption for classic vehicles will be extended by one year to January 1, 1974 to come into effect from April 1, 2014.
  • An extension to the current VED exemption for disabled drivers to individuals receiving the enhanced mobility element of Personal Independence Payment (PIP) with effect from April 8, 2013; those awarded the standard mobility element of PIP will be entitled to a 50% reduction in VED.
  • The introduction of legislation to support indefinite off-the-road declarations.
  • An extension to the amount of time that a tax disc does not have to be displayed following the payment of tax from five working days to 14 calendar days. In addition, legislative changes will be made which will allow advanced registration year round and 14 days in advance rather than just four days.

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, 2013.

The Chancellor announced in the Budget that the fuel benefit charge multiplier for company cars will increase from £20,200 in 2012/13 to £21,100 in 2013/14. From April 6, 2014, the multiplier will increase by RPI.

Van benefit charge

The Government has frozen the van benefit charge at £3,000 in 2013/14. It will increase by RPI from April 6, 2014

Van fuel benefit charge 2013/14

From April 6, the van fuel benefit charge multiplier will increase from £550 to £564. It will increase by RPI from April 6, 2014.