CHANCELLOR of the Exchequer Alistair Darling delivered his third Budget (Wednesday), March 24, 2010 against a background of a forthcoming general election and slow economic recovery.

In reality, the 60-minute Budget statement was short on significant announcements, but long on pre-election politics.

With a general election expected to be held on May 6, the Chancellor was out to woo voters in what was the Government’s last Budget statement before polling day.

There were announcements on:

• Changes in benefit-in-kind company car tax on low emission models
• Fuel duty
• Additional money being made available for road repairs and ‘Managed Motorways’ schemes designed to ease congestion
• And the establishment of a L2 billion public-private sector Green Investment Bank fund to help establish low carbon projects, including in the transport arena

With some measures due for implementation next month and others in 2011 or beyond, here are the key initiatives.

Company car tax

Company car benefit-in-kind tax thresholds will tighten by 5 g/km on April 6 with the Chancellor confirming that thresholds will reduce by a similar amount in 2011/12 and 2012/13.

Meanwhile, in a new announcement the Chancellor said that the percentage of list price subject to company car tax would be halved for cars emitting between 1 and 75g/km CO2, for five years from April 6.

This means that drivers will pay benefit-in-kind tax on petrol-engined models at the rate of 5% (8% for diesels).

However, at the moment there are no models on sale in the UK that meet the sub 75 g/km level, although the measure is largely aimed at the range of soon-to-be-introduced plug-in hybrid models from some manufacturers.

In other company car tax changes, April 6, 2012 will see the abolition of the special 10% benefit-in-kind tax rate for company cars emitting 120g/km or less, which has been in place since April 2008.

Instead, the 10% tax rate will apply to company cars with emissions up to 99g/km. Additionally, the system of bands will then increase by one percentage point with every 5g/km of from 10%.

Meanwhile, a number of other company car tax changes will also be introduced from April 6, 2011. They are:

• Abolition of the L80,000 price cap on company car list prices for benefit-in-kind tax purposes
• The axing of company car tax discounts that currently apply to alternatively-fuelled vehicles (electric-petrol hybrids, ‘Flex-Fuel Vehicles’, bi-fuels, road fuel gas and bioethanol). The only discount that will remain from 2011/12 is that for electric cars.

National Insurance rate rises

The Chancellor reconfirmed that employee and employer National Insurances rates will rise by 1% from April 6, 2011. That means that employees will pay 12% on earnings. Employers will see their NICs rise from 12.8% to 13.8% including those paid on benefits-in-kind such as company cars and company-funded fuel used privately.

Roads investment

An additional L84 million to fund repairs for local roads damaged by the recent adverse weather. The cash will be distributed to local highways authorities over the coming months based on the length and condition of roads they are responsible for. The cash, said the Chancellor, would help road users by reducing the congestion and damage to vehicles caused by potholes.

In addition, the Chancellor announced a further L25 million investment to enable further progress on its ‘Managed Motorways’ programme and other transport projects. The funding will be spent through 2010/11 and will speed up the delivery of key road projects such as more hard shoulder running schemes designed to reduce congestion and improve journey time reliability and safety benefits to road users.

Green Investment Bank

Budget 2010 announced the Government’s intention to establish a Green Investment Bank (GIB) that will operate on a commercial basis and involve both public and private sector capital. The fund will be used to support further investment in low-carbon projects, including transport-related initiatives.

Further information

For the latest Budget news on the fuel duty increase, read Fuel duty increases from April.

For the latest Budget news on the increase in the free fuel multiplier, read Free fuel becomes more expensive.

There is additional commentary on the Budget in the Editor’s Blog Budget 2010.COMPANY car tax thresholds tighten from April but incentives in place of ultra low emission cars.