20 March 2014
Chancellor Reveals Budget 2014
As the Chancellor George Osborne revealed his budget this week, we take at look at what this means for the fleet industry.
Mr Osborne has allowed us some clarity with future tax rates along with a promise to simplify employee benefits & expenses.
Indeed, the government responded to the OTS (Office of Tax Simplification) review of employee benefits & expenses by saying it will consult on four simplifications. These include abolishing £8500 threshold, voluntary payrolling of benefits, benefits exemption & general exemption for non-taxable expenses.
Mr Osborne outlined the Government’s intent to review the rules underlying the tax treatment of travel and subsistence expenses and will call for evidence on remuneration practices to inform any future reforms.
Company Car Tax Rates
Company car tax rates will increase from 6 April and have been announced for the following two tax years, 2015/16 and 2016/17, but were unknown from 2017/18 onwards. This year’s budget has given fleets further clarity on company car tax by clarifying the rates for 2017-18 and 2018-19, but there was no scrapping of the 5% BIK tax rate for EVs.
The appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75g/km, to a maximum of 37%, in both 2017-18 and 2018-19. In 2017-18, there will be a 4 percentage point differential between the 0-50 and 51-75g/km bands and between the 51-75 and 76-94g/km bands.
LCV Tax Rates
For light commercial vehicles, including ‘double-cab’ pickup trucks, the BIK tax benefit charge will rise to £3090 in 2014/15, or £3581 if the employer also provides ‘free fuel’ for any private mileage.
VED rates for cars, motorcycles and the main rates for vans will increase by RPI from 1 April 2014.
As announced at the Autumn Statement 2013, the Government will introduce legislation to reduce tax administration costs and burdens by making the following changes with effect from 1 October 2014.
- Pay VED by direct debit annually, biannually or monthly
- A 5% surcharge will apply to biannual and monthly payments
- A paper tax disc will no longer be issued
It has already been announced that fuel duties are going to remain frozen until September 2015 and was confirmed in this weeks speech.
The Government’s action on fuel duty will save a typical motorist £680 by 2015-16.
Chancellor Osborne has also introduced fuel duty incentives for methanol and from April 2015, the government will apply a reduced rate of fuel duty to methanol. The rate will be set at 9.32 pence per litre; the Government will review the impact of this incentive alongside the duty incentives for road fuel gases at Budget 2018.
Fuel benefit charge
Company van, car and van fuel benefit charges will increase in line with inflation for 2015-16. The increase will be based on the September 2014 RPI figure. The changes will be introduced by secondary legislation later in 2014, in time for the normal tax code exercise in January 2015.
Legislation will be introduced in Finance Bill 2015 to extend VBC (Van Benefit Charge) support for zero emission vans to 5 April 2020 on a tapered basis. In 2015-16 the VBC rate paid by zero emission vans will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016-17, 60% in 2017-18, 80 per cent in 2018-19 and 90% in 2019-20, with the rates equalised in 2020-21.
The Government will extend the ECA (Enhanced Capital Allowances) for zero emission goods vehicles to March/April 2018. However, to comply with EU State aid rules the availability of the ECA will be limited to businesses that do not claim the Government’s Plug-in Van Grant.
The Budget 2014 also provides an extra £200 million, across the UK, to set up a potholes challenge fund, which will be welcomed by fleets. This emergency funding will be set aside by the Government and will allow local authorities to repair up to 3.2 million potholes following the severe weather.
For more information on what the budget might mean for your company vehicles, please do not hesitate to call a member of the Activa team on 0845 601 3497.