Fleet News

Pre-budget report: Brown's speech heralds year of big fleet change

CHANCELLOR of the Exchequer Gordon Brown has started the countdown to a year of change for fleets in 2003 in his pre-Budget statement.

Fleets have been given a four-month warning to prepare for the introduction of tax schemes that are being introduced next year as part of a Government commitment to use taxation to protect the environment. There are several key changes being introduced from April.

  • The tax bands of the carbon dioxide-based company car tax will change, pushing up bills for drivers in all but the cleanest cars.
    Company car users pay tax on a percentage of the value of their cars, defined by how much CO2 their vehicles produce – ranging between 15% and 35%.
    This year, the starting band for the tax is 15% for petrol cars producing165g/km and it rises by 1% for every 5g/km increase in CO2 to 265g/km/35%.
    From next year, the starting point for the tax moves down to 155g/km. As a result, an 'average' fleet car with emissions of 200g/km currently incurring a 22% tax liability would incur 24% from next year.

  • The Government is changing the rules on taxation of free fuel for private mileage from next year.
    The current system is based on engine size, but from April drivers will pay tax on a set value of the benefit according to their vehicle's CO2 emissions, using the bands introduced for company car tax. The Government will set a nominal value for the perk – £14,400 in the 2003-04 financial year.
    So the driver of a car producing CO2 at 215g/km would pay tax on 27% of the benefit charge of £14,400 e.g 27% x £14,400 x 40% = £1,550.20.

  • Thirdly, increases in National Insurance Contributions mean that from the next financial year, employers see their own tax bills rise. From April 2003, NIC rates will increase from 11.8% to 12.8%.

  • Fourthly, from March 2003 there will be a new lower rate of Vehicle Excise Duty for vans of £105 if they meet the challenging Euro IV emissions standard. The discount will be reviewed in the run-up to this standard becoming mandatory in 2006. Brown also revealed in his pre-Budget statement that fleets could expect more environmentally-based taxes.

    He said: 'Taxes and other economic instruments can provide incentives for behaviour that protects or improves the environment. The Government has discussed its approach to environmental taxation with a range of stakeholders.'

    As part of the focus, the Government committed to the importance of early and extensive consultation, providing early information about new taxation and the rates involved and to exploring revenue neutral packages to reduce excessive impacts on business competitiveness.

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