British chancellor George Osborne may have many detractors following years of austerity measures and stagnant economic growth, but he will have won back a little favour with motorists following his latest Budget announcement.
The 2013 Budget saw Mr Osborne confirm that the planned three-pence-per-litre increase in fuel duty scheduled for September would be scrapped altogether. Britain has seen record fuel prices at the pumps in the last year or so, and an increase in duty – already the highest in Europe – would surely push them to a higher level still. AA president Edmund King welcomed the announcement, saying: “A September fuel duty hike would have been the last straw likely to break UK drivers’ budgets. The freeze is a pragmatic move and will bring some relief at the pumps.”
Yet while the fuel duty scrapping took the headlines, it is not a reduction in duty; in fact, it is the change to company car taxation in the 2013 Budget which should make the bigger difference to motorists.
Under the current regulations, all company vehicles emitting 0-75g of carbon dioxide per kilometre are under one five per cent tax band; the new rules will split this up to reward owners of low-emission vehicles and charge those with higher emissions more. Owners of cars emitting between 0-50g/km will pay five per cent company car tax in 2015-16 and seven per cent in 2016-17. Those with cars in the 51-75g/km bracket will pay nine per cent in 2015-16 and 11 per cent in 2016-17.
It means there will at last be a significant difference in the company car tax banding for low-emission vehicles, making emissions a key factor for fleet operators when it comes to replacing new vehicles. The Society of Motor Manufacturers and Traders is certainly pleased with the new tiering system, with head of communications Keith Lewis saying: “This is exactly what we have been calling for. We wanted a greater differentiation between low-emission vehicles and we are delighted with it. It was quite a broad brush approach before and anything that encourages people into low-emission vehicles is going to be good.”
Yet while fleet owners can reduce their company car tax payments by choosing low-emission vehicles, it is not the only consideration. Low emissions usually go hand-in-hand with good fuel economy, but then there is also the purchase price, reliability and suitability for the business purpose which must be given thought before fleet vehicles are purchased. So while a brand-new hybrid may reduce tax liabilities, the fleet owner may find that a second-hand Citroen is a better option for the company.
Another benefit for motorists in the Budget is a further investment infrastructure to try and bring Britain’s road surfaces up to a better standard, an important issue which was highlighted by the Asphalt Industry Alliance in recent weeks.