In what was billed as the last Budget before Brexit, the Chancellor, Philip Hammond, championed the end of austerity by making extra funds available across a range of public services including the NHS, armed forces and schools. With an unexpected boost to the economy arising from increased growth and record employment he accelerated the commitment to increase the personal allowance to £12,500 whilst also relieving pressure on the High Street and the roll out of Universal Credit.
Tech giants, such as Amazon, Facebook and Google, may have been surprised by the introduction of a 2% revenue tax but what are the key tax and spending announcements that fleets should take notice of?
Changing the basis of company car tax and Vehicle Excise Duty (VED)
Hopes were dashed when the Chancellor failed to mention company cars in his speech despite calls from industry representatives for clarity beyond April 2020 when the taxation of all new cars will be based on emissions according to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). Publication of new company car tax bands and VED rates have been delayed pending a review which is due to conclude in the spring of 2019.
Meanwhile, the government has confirmed that company car tax and VED will continue to be based on CO₂ emissions using the New European Driving Cycle (NEDC) for cars registered before April 2020. Whilst bringing some clarity this announcement will add more complexity to the taxation of company cars.
Van benefit charge
From 6 April 2019 the van benefit charge will rise in line with inflation to £3,430 (from £3,350), with electric vans taxed at 60% of the full charge.
Fuel benefit charge
The multipliers will rise in line with inflation, as follows, with effect from 6 April 2019:
- van benefit fuel multiplier — £655 (from £633); and
- car fuel benefit multiplier — £24,100 (from £23,400).
Optional Remuneration Arrangements (OpRA)
Following a consultation, the government has confirmed that it will address two anomalies in the OpRA rules, by introducing legislation to:
- ensure the amount foregone includes both the cost of the car or van and connected costs, such as maintenance and insurance; and
- adjust the tax relief of any capital contribution when the car is made available for only part of the tax year.
Taxation of emergency vehicles
New legislation will be introduced to ensure employees in the emergency services will not face an immediate, significantly increased tax charge for the private use of their emergency vehicle following last year's changes to the ‘use of assets’ legislation. The new measures will extend the scope of the current exemption for emergency vehicles to cover all commuting journeys and introduce transitional arrangements until 5 April 2020.
Annual Investment Allowance
To incentivise investment in plant and machinery, which includes vans and heavy goods vehicles, the Annual Investment Allowance will be temporarily increased to £1,000,000 (from £200,000) between 1 January 2019 and 31 December 2020.
The special writing down allowance, which is applied to cars with CO₂ emissions exceeding 110 g/km will be reduced to 6% (from 8%) with effect from April 2019.
The availability of first year allowances for electric charge point equipment will be extended until April 2023.
Fuel duty on petrol and diesel has been frozen for a ninth successive year. With duties now 44% less than they would have been had the fuel duty escalator been applied each year since 2011, the average car driver has saved £1,000 and the average van driver £2,500 over that period.
Vehicle Excise Duty (VED)
From April 2019, VED for cars, vans and motorcycles will rise in line with inflation.
VED rates for heavy goods vehicles (HGVs) will be frozen once again. However, from February 2019 HGVs that meet the latest Euro VI emissions standards will be eligible for a 10% reduction in the HGV levy, but for other HGVs the levy will increase by 20%, subject to the maximum rate permitted under European legislation.
Following a consultation regarding reform of VED for vans the government has decided to:
- further develop its understanding of the impacts of WLTP on van CO₂ emissions in preparation for the introduction of new rates and bands from April 2021;
- introduce a 2-category approach based on the weight of the van, with each category graduated by the CO₂ emissions of the van; and
- provide ongoing incentives by introducing a standard rate of £0 for zero emission vans, and an ongoing discount for ultra-low emission and other alternatively fueled vans.
What did we know already?
We thought it worthwhile to recap some previously announced measures that will affect fleets.
Company car tax from April 2019
The BiK percentage for all CO₂ emission bands will increase by 3% so that the maximum 37% will be applied to cars with emissions of 165 g/km or greater.
For diesel cars that are subject to the 4% diesel supplement the maximum BiK percentage will be applied from 145 g/km.
Company car tax for ULEVs from April 2020
From 6 April 2020 the company car tax charged on ultra-low emission vehicles (ULEVs) will be calculated by reference to a car’s CO₂ emissions and zero emission range. Accordingly, for ULEVs the BiK percentage of 16% applied in 2019/20 will be reduced in 2020/21 as follows:
- 0 g/km — 2%;
- 1 – 50 g/km — 2% to 14% — depending on zero emission range.
New bands will be introduced for cars with CO₂ emissions exceeding 50 g/km; starting at 15% for cars with emissions up to 55 g/km, the BiK percentage will increase by 1% for each 5 g/km band, up to the maximum of 37%.
Vehicle Excise Duty (VED)
From April 2019 zero-emission capable taxis will be exempted from the VED supplement applied to cars with a list price over £40,000.
An array of transport investment was announced utilising funds announced in previous Budgets.
National Productivity Investment Fund
The National Productivity Investment Fund (NPIF) was created in spring 2017 to improve UK productivity by investing in strategic innovation and infrastructure projects.
To support projects across England that ease congestion on local routes, £150 million of the NPIF will be made available to local authorities for small improvement projects such as roundabouts and an extra £240 million will be made available to the six metro mayors for significant transport investment in their areas as an extension of the Transforming Cities Fund.
A further £440 million of the NPIF will be made available for transport investment by city regions, and £90 million will be used to create Future Mobility Zones.
National Roads Fund
Delivering on its commitment to ring-fence VED paid in England to invest in roads, the government announced that the National Roads Fund will be £28.8 billion between 2020 and 2025. This will provide long-term certainty for roads investment, including the new major roads network and large local major roads schemes.
Roads Investment Strategy 2
The launch of the Roads Investment Strategy 2, the largest ever investment in England’s strategic roads, will enable the government to build on the success of the Roads Investment Strategy 1, such as the A1(M) link to Newcastle, and progress transformative projects like the A66 Trans-Pennine, the Oxford Cambridge Expressway, and the Lower Thames Crossing.
The government expects to spend £25.3 billion of the National Roads Fund on this strategy between 2020 and 2025.
£420 million will be allocated to local authorities in 2018/19 to tackle potholes, repair damaged roads, and invest in keeping bridges open and safe.