Budget 2015: Company car tax hike and a fuel duty freeze for fleets

Company car drivers will face a three percentage point year-on-year hike in their company car tax from 2019/20.

However, the Government has indicated that the rates for ultra-low emission vehicles (ULEVs) will increase “more slowly than previously announced”.

Drivers of plug-in vehicles face huge year-on-year increases over the next four tax years following announcements made in last year’s Budget.

Chancellor George Osborne was accused of discouraging the take-up of ULEVs – defined by the Government as models with CO2 emissions of 75g/km and below – following the changes to company car tax rates announced in Budget 2014.

It meant benefit-in-kind tax rates for ULEVs rising at a significantly faster rate over the next four years than those for higher emissions cars.

Osborne, it appears, has recognised that was an error and will now look to slow year-on-year company car tax increases on ULEVs, while increasing the year-on-year change for cars emitting more than 75g/km at a faster rate.

Andrew Hogsden, senior manager for Fleet Consultancy at Lex Autolease, said: “The announcement that BIK rates will rise by 3% in 2019 makes it even more important for businesses to identify vehicles with low CO2 emissions that are both fit for purpose and attractive to drivers. 

“They should also consider new and alternative technologies, which will become increasingly available by 2019, as well as best in class traditional fuels.”   

David Brennan, CEO of Nexus Vehicle Rental, added: “The news that company car tax will increase at a slower rate than planned is a welcome bonus to the businesses who rely on these vehicles to keep their operations running efficiently.”

The fuel duty increase planned for September 1, 2015, due to be 0.54 pence per litre, will also be cancelled.

Matt Dyer, managing director of LeasePlan UK, said: “Drivers and fleet owners will be pleased to see that the Government has continued the freeze on fuel duty.

"Fuel costs remain a significant overhead for businesses and public sector bodies that operate vehicle fleets despite tumbling crude oil prices that have seen prices at the pumps fall to the lowest this decade.”

RAC chief engineer David Bizley added: “What we need now is a firm commitment from all political parties ahead of the election not to reverse his decision as soon as they take office as this would be a retrograde, harmful step that will lead to an increase in both household and business costs and dampen economic growth.”

In total, the Government will have eased the burden on motorists by £22.4 billion by the end of 2015-16. This equates to a saving of £675 for a typical motorist, £1,400 for a small business with a van, and £21,000 for a haulier.

Due to Government action on fuel duty since 2011, by the end of 2015-16 the typical motorist will save £9 each time they fill their tank, says Osborne.

By the end of 2015-16, fuel duty will have been frozen for five years, the longest freeze for more than two decades.

Howard Cox, founder of the FairFuelUK campaign, also welcomed the fuel duty freeze, but asked: "Why doesn't the Government go further and drive the UK economy continually upwards by cutting duty?

“We give Mr Osborne six out of 10 for endeavour and will continue to campaign that duty should be frozen for the lifetime of the next Parliament with more pressure on a real cut in the Autumn Statement.”

The chancellor also announced support for road hauliers. He said the Government will review the speed with which heavy goods vehicles (HGV) driving tests and driver medical assessments currently take place and will consider options to accelerate both in order to help address the shortage of qualified HGV drivers.

The Government will also work with road haulage firms on an industry-led solution to the driver shortage, including looking at the right level of access to, and funding support for, training.

Driverless cars were also singled out by the chancellor for investment, with £100 million earmarked for research and development into intelligent mobility.

The Treasury said that the cash will be used to focus on enhancing the development of driverless car technology and the systems required to implement and adopt the technology, such as telecommunications.

Brennan said: “The promises to invest more in research and development of low emission vehicles and in driverless vehicle testing demonstrate a commitment to helping Britain become a leader in vehicle innovation and technology which can only be beneficial to our motorists and fleets.”

The Government is also promising transform the tax system over the next Parliament by introducing digital tax accounts, removing the need for annual tax returns.

By the end of the next Parliament, more than 50 million individuals and small businesses will be able to see and manage their tax affairs online.

‘Making Tax Easier’ sets out what this will mean for taxpayers. As a first step, the Government will publish a roadmap later this year setting out the policy and administrative changes needed to implement this reform, introduce digital tax accounts for all five million small businesses and the first 10 million individuals by early 2016, and abolish Class 2 NICs in the next Parliament and consult on reforming Class 4 NICs to include a contributory benefit test.

See the next edition of Fleet News for further analysis and comment on Budget 2015.