FLEETS have got off relatively lightly in the Spring Budget announced today by Chancellor Philip Hammond with fuel duty frozen. However, a raft of business taxation changes and new consultations could affect the future running of effective fleet management.
Vehicle Excise Duty (VED) rates for cars, vans and motorcycles registered before April 2017 will be increased by Retail Price Index (RPI).
The Budget papers also announced that a detailed draft plan will be announced later in the year with the aim to improve the UK’s air quality with an appropriate tax treatment for diesel vehicles.
Mike Hawes, SMMT chief executive, said: “The automotive industry is investing significantly in new technology to address the issue of air quality, so we look forward to working with government to encourage the uptake of the latest, low emission vehicles, regardless of fuel type.
“Nearly one in two new car buyers chose a diesel last year and getting more Euro 6 diesels on the road will be part of the solution as we also strive to meet our climate change targets.
LeasePlan UK’s managing director Matt Dyer said: “The rate of Fuel Duty has been frozen since March 2011, saving the driver in households and businesses on average £130 and those who work in logistics, with light commercial vehicles saving an estimated £350 per year.
“However, the UK still has one of the highest levels of taxation on fuel, which places an undue burden on motorists. This, it can be argued, restricts economic growth through lost investment and expansion by businesses.”
Paul Hollick, managing director of The Miles Consultancy and chairman of the Institute of Car Fleet Management, added: “There were some important pointers to future government policy toward fleets in today’s budget.
“Fleets will get the chance to have their say on diesel taxation in the coming months, ahead of what could be big changes in the Autumn statement. One clue from the red book is that the Treasury expects revenues from fuel duty to rise by £2 billion to £30 billion a year by 2021.”
Although the Budget will not make major changes to the business tax regime, it will continue to provide a stable and certain environment to support business investment, consistent with the business tax road map.
The tax free dividend allowance will be reduced from £5,000 to £2,000, cutting the tax differentials between employed and self-employed.
Jamie Smith, partner at Foster Denovo, says: “Not a particularly great day if you are a contractor working through your own limited company. The Chancellor stopped short of equalising NIC rates for self-employed and employed workers, which was expected with just a 1% increase from 2018.
“In my opinion, this is likely to be just the beginning of higher taxation for many limited company contractors as further measures to equalise taxation between self-employed and employed”
The Chancellor announced more spending on upgrading the road infrastructure, with an additional £220 million fund to tackle congestion and improve the transport network, with £90 million for the North and £23 million for the Midlands.
Other highlights from the budget include:
- £270 million will also be spent to keep the UK at the forefront of disruptive technologies like biotech, robotic systems and driverless vehicles
- The Northern Powerhouse Investment Fund (NPIF) will be investing £740 million in digital infrastructure by 2020-21, to support the next generation of fast and reliable mobile and broadband communications for both consumers and businesses.
- April 2018, when the Class 2 NIC is abolished, the main rate of Class 4 NICs for the self-employed will increase by 1% to 10%, with a further 1% increase in April 2019 which will affect self-employed and SMEs
- National Living Wage to rise to £7.50 and Personal Allowance raised to £11,500
- Doubling the rate of Small Business Rate Relief to 100%, and raising the thresholds so that 600,000 small businesses are taken out of paying rates altogether
Hawes concluded: “Measures to reduce congestion will help as will funding announcements for the design and development of battery technology. The UK is Europe’s number one electric vehicle market, but consistent and long term government support is essential if we are to retain this position.
“UK Automotive plays a critical role in the country’s economy but future success will depend upon maintaining competitiveness. It’s disappointing, therefore, that the Chancellor hasn’t prioritised additional funding for supply chain development, nor addressed the flaw in business rates that disincentivises investment in plants and machinery.
“On a more positive note, the focus on technical education is welcome, as we seek to fill the 5,000 vacancies that exist in our sector and invest in skills to improve productivity still further.”
Do You Have A Vehicle Leasing Question?