Budget Update March 2016
Overall, the 2016 Budget was an insight to a more forward-looking Britain with a clear focus on the environment, efficiency in travel and driver safety. With tax relief provided for low emission and electric vehicles, the determination to meet air quality standards was clear. The drive for Britain to lead the way in connected and driverless vehicles also supports the progressive outlook on the future of mobility, with ultra-low emission vehicles at the centre. Evidenced by a commitment to invest in the future of mobility, the announcement of a £61 billion investment to support the mobility network transformation and advancement is promising. It is good to see such a forward-looking statement – an encouraging future for alternative and sustainable business mobility.
Company car tax
The announcement of company car benefit-in-kind tax rates beyond 2019/20 were expected, but not delivered, meaning company car drivers will be selecting cars today without knowing the impact of benefit-in-kind tax in 2021/22. Positive incentives for the cleanest cars continues with company car tax based on the carbon dioxide (CO2) emissions from 2020/21 and with the suggested reform of bands for ultra-low emission vehicles.
Surprisingly, the Chancellor did not specifically mention car salary sacrifice schemes, however, may decide to introduce an emissions cap that would limit employees to choosing only ultra-low emission models within car salary sacrifice programs. It will be interesting to see how this develops.
Road infrastructure and maintenance
Investment in the future is key to this Budget, with the biggest investment (£61 billion) in transport infrastructure in generations and a 50 per cent increase in capital investment in the transport network. The launch of the second Roads Investment Strategy planned for 2020/21 – 2024/25 is set to include motorway upgrades and the future transformation of east-west road connections. Importantly, the allocation of the £50 million Pothole Action Fund for England in 2016/17 will enable local authorities to fill nearly a million potholes – a promising advance for the duty of care of all drivers.
A forward-looking approach has been pursued with plans to establish the UK as a global centre for excellence in connected and autonomous vehicles. Trials of driverless cars on the strategic road network by 2017, the tackling of regulatory barriers, a £15 million ‘connected corridor’ from London to Dover enabling vehicles to communicate wirelessly with infrastructure and possibly other vehicles, and even trials of truck platooning on the strategic road network, will all contribute to the UK leading the way in the future of transport.
Vehicle Excise Duty (VED)
Continuing the trend of support for green vehicles a majority of charges have been held for those with lower emissions under the current VED. With the new VED approaching, first year rates will vary according to CO2 emissions, with a flat rate of £140 applying 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.
Corporation tax and Insurance Premium Tax
Another interesting announcement is the confirmation that the main rate of Corporation Tax will remain at 20 per cent in 2016/17 before reducing to 19 per cent in 2017/2018, and 17 per cent in 2020/2021. Insurance Premium Tax is, however, set to rise from 9.5 per cent to 10 per cent from October 1, 2016, impacting on vehicle insurance and roadside assistance with money raised to be spent on improving flood defences.
To be received well is the announcement that fuel duty is to be frozen again in 2016/17, saving the typical motorist £75 a year and £270 a year to a small business with one van.
Car and van fuel benefit charge
The news that company-funded fuel used privately will see a benefit-in-kind tax bills increase by £100 to £22,200 from April 6, 2016, and van benefit-in-kind tax seeing an increase of £20 to £3,150 in the same period, with fuel benefit charges increase from £594 to £598 – will continue to pressurise businesses and drivers alike. However, support for zero-emission vans is evident with Benefit Charges remaining at 20 per cent of the main rate.
Good news for many comes from the extension of the 100 per cent First Year Allowance (FYA) for businesses purchasing low emission cars to April 2021. With companies having a two-year window to react to the changes, thresholds for capital allowances on cars bought outright will up to 50g/km means companies can write down the full cost against their taxable profits; vehicles emitting 51-110g/km results in companies writing down 18 per cent of the cost of the car against their taxable profits each year, on a reducing balance basis; and for vehicles above 110g/km, from 2018 companies can write down 8 per cent of the cost of the car against their taxable profits each year, on a reducing balance basis.