The UK Government’s Spring Budget was announced by Chancellor Rishi Sunak on Wednesday 03 March 2021.
The Chancellor spells out a clear focus on recovery from the COVID-19 pandemic, stating that the economy will recover more quickly from the pandemic than previously thought, returning to its pre-pandemic size six months earlier, by the middle of next year. In five years’, time the economy will still however be 3% smaller than it otherwise would have been without COVID-19. An additional £65 billion in spending in response to coronavirus takes the total fiscal support to £407 billion, with forecasts showing that government borrowing will reach £355 billion in 2020/21, of 17% of the national income - the highest level since the Second World War.
An increase in the rate of corporation tax from April 2023 will help repair the public finances, coming into effect after the point when the Office for Budget Responsibility (OBR) expects the economy to return to pre-pandemic levels.
Whilst recovery was the main focus, the Chancellor also made reference to some key topics such as Fuel Duty, with the government pledging to freeze fuel duty in 2021-22. Any future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050.
The Chancellor also outlined that the government will uprate Vehicle Excise Duty (VED) rates for cars, vans and motorcycles in line with Retail Price Index (RPI) from 01 April 2021.
And from 06 April 2021, fuel benefit charges and the van benefit charge will increase in line with Consumer Price Index (CPI) for company vehicles.
David Bushnell, Principal Consultant, Alphabet (GB) commented: “Following the UK Government’s announcement to increase corporation tax to 25% from 2023, any company that runs vehicles above 50g/km will be impacted. Businesses need to assess their fleet strategies and place greater emphasis on the whole life cost of the vehicles they operate. This will be crucial to creating cost savings for businesses, and electric and plug-in hybrid vehicles will play a central role in this. These vehicles should no longer be considered alternative fuels, but instead should form a natural part of the next cycle of vehicles for company car drivers. This will not only result in cost savings for companies and drivers alike, but will also keep them one step ahead of the national timeframe for electrification.”
Our Budget Summary guide examines the findings from Budget 2021, and offers explanations and guidance to the company car tax system. Click here to find out more.