Fleet News

Budget 2007: fleet summary

  • Click here to access the BBC's Budget 2007 calculator, to work out exactly how your finances will be affected.

    The essential points from today's budget

    Company car tax

  • The government announced it is considering the case for changing the structure of AMAPs to 'align the tax and National Insurance treatment and to ensure that rates and thresholds are set at an appropriate level to promote environmentally friendly business travel'.

  • Following on from the announcement in last year's budget of a reduction in the lower company car tax threshold of 15% from 140g/km to 135g/km from April 6, 2008, the Chancellor said today that the thresholds for 2009-10 percentage rate will be frozen at 2008-09 levels.

    Income tax

  • Basic rate of income tax reduced by 2 pence from 22 pence from next April, creating a 20 pence basic rate and 40 pence higher rate.

    Company car fuel

  • The fixed figure on which the company car fuel benefit charge is based will be maintained at £14,400 in 2007/2008.

  • The VAT fuel scale charge will increase in line with fuel pump prices from May 1, 2007.

    Capital allowances for cars

    As part of the Government’s commitment to 'reducing the administrative burden in the tax system', the Budget announced further detail on options for simplifying the rules for capital allowances on cars.

    The government said today in supporting Budget documentation that its preferred option was to retain the existing 100% first-year allowance for cars with CO2 emissions up to 120g/km; use the general plant and machinery capital allowances pool for cars with CO2 emissions between 121 and 165g/km and introduce a new pool, with a lower writing-down allowance than that of general plant and machinery pool for cars with CO2 emissions above 165g/km.

    'The proposed option limits the number of rates that business would have to identify. It also ensures the value of the allowance across the CO2 range represents a significant percentage of the typical car's price in order to provide an incentive towards the purchase of cars with lower CO2 emissions. In particular the option utilises the existing general plant and machinery capital allowances pool for many cars as a means of reducing compliance costs,' the Treasury said today.

    The 2006 consultation suggested the Government is considering abolishing or reforming the lease rental restriction for 'expensive cars'. In moving the tax deduction onto a CO2 emissions basis, the government believes it is appropriate to reflect the CO2 bands for capital allowances purposes.

    The options being considered are to:

    a) abolish any lease rental restriction to all cars with CO2 emissions up to 165g/km, permitting the full allowance of leasing payments against the profits of businesses leasing those cars

    and

    b) apply a uniform fixed percentage disallowance on all the leasing payments that businesses can offset against profits for all cars with emissions above 165g/km.

    However, the Government has said the consultation on these issues will continue. Comments made in consultation will be published in the summer. Further comments are required by May 16, 2007.

    Fuel duty

  • An increase in fuel duty rates of 2 pence per litre from October 1, 2007, a further 2 pence in 2008, and 1.84p on April 1, 2009.

  • For 2007-08 the duty for rebated oils will increase by 2 pence per litre, also from October 1.

  • further support for biofuel uptake including extending the 20 pence per litre biofuels duty differential to 2009-10. The duty differential for 2010-11 will be announced in 2008.

  • Road fuel gases: the differential for CNG and main road fuels will be maintained in 2009-10 and will be decreased for LPG by a further 1 pence per litre

    Fuel duties

    Pence per litre (unless stated) Old duty rate Change New duty rate
    Ultra-low sulphur petrol/diesel 48.35p +2p 50.35p
    Sulphur-free petrol/diesel 48.35p + 2p 50.35p
    Biodiesel 28.35p +2p 30.35p
    Bioethanol 28.35p + 2p 30.35p
    Liquefied petroleum gas used as road fuel 12.21p per kg + 4.28p per kg 16.49p per kg
    Natural gas used as road fuel 10.81 per kg + 2.89p per kg 13.70p per kg
    Rebated gas oil (red diesel) 7.69p + 2p 9.69p
    Fuel Oil 7.29p + 2p 9.29p

    All fuel duty rate changes will take effect from October 1, 2007

    VED

  • the rate of VED for the most polluting cars (Band G) increased to £300 in 2007-08 and £400 in 2008-09 and for low carbon Band B cars reduced to £35 from £50 in 2007-08 with that rate then frozen for the subsequent two years

  • The rates for Band C-E, cars registered before 2001 and all LCVs by £5 in each of the next three years

  • The rate for Band A vehicles frozen at £0

  • the rate for Band F raised by £10 in 2007-08, then £5 in each of the subsequent two years

  • the VED rates for petrol and diesel cars will be aligned since the differential in nitrogen oxides and particulate matter emissions for news cars 'is expected to fall to close to zero once Euro V and VI emission standards become mandatory'. The rates for petrol are being aligned upwards to match diesel rates, then the additional £5 added to both.

  • All changes to VED rates are effective from March 22.

  • For a breakdown of the impact of vehicles by band and by fuel type click here. (Source: CAP)

    Graduated vehicle excise duty (VED) for private vehicles (registered March 2001)

    VED band CO2 emissions (g/km) Change Alternative fuel cars Petrol cars Diesel cars
    A 100 and below - £0 £0 £0
    B 101 to 120 -£15/-£5/-£15 £15 £35 £35
    C 121 to 150 £5/£15/£5 £95 £115 £115
    D 151 to 165 £5/£15/£5 £120 £140 £140
    E 166 to 185 £5/£15/£5 £145 £165 £165
    F 186 to 225 £10/£15/£10 £190 £205 £205
    G* 226 and above £85/£90/£85 £285 £300 £300

    *for new cars registered from March 23, 2006.
    Source: HM Treasury

    VED for light good vehicles (registered March 2001)

    £ per year Change New rate
    Euro IV incentive* +£5 £115
    Standard rate +£5 £175

    *for Euro IV compliant vans registered between March 1 and December 31, 2006

    Industry comment

  • VED

    Tim Hudson, commercial director at LeasePlan, said: ‘It comes as no surprise that ‘gas guzzlers’ have been hit hard by the increase in the top band of VED and that greener vehicles have been encouraged by a much kinder tax structure.’

    Edmund King, executive director of the RAC Foundation, added: ‘Incentives to go green are welcome.Mr Brown's radical proposal for tax disc reforms gives a green light to cleaner motoring. Drivers and manufacturers need time to change their vehicles. Reduced tax for cleaner vehicles is a great incentive to help motorists choose the most environmentally friendly model suitable for their needs.’

    Sue Robinson, director of the RMI national franchised Dealers Association (NFDA), said: 'The Chancellor has attacked the motorist with the increase in VED for 4x4s and other large vehicles, but has failed to offset this by any extra investment in transport. There are more effective ways to influence the buying habits of motorists than the ‘blunt instrument’ approach of a road tax increase.

    ‘Instead of punishing motorists for choosing what is available, the government should be doing much more to encourage vehicle manufacturers to develop hybrid vehicles,'

    Alison Chapman, tax partner at Deloitte said: 'These changes may not influence the sale of new high emission cars to a retail customer. However the effect on companies is likely to be very different. A drop in anticipated re-sale value (plus the increased annual cost) can have a big effect on the whole life cost to the company which is then less likely to want to add these cars to its fleet.

    In addition, it is expected that there will be a change to the basis of taxation on the capital cost of company cars. This is expected to move to taxation on an emission basis from April 2008.'

    Biofuels

    'The Chancellor has ignored the opportunity to generate market demand for biofuel. He seems to expect industry and the consumer to do all the work to get biofuel going, without the much-needed tax inducements or Government support,' said Ray Holloway, director of the RMI Petrol Retailers Association.

    Business mileage

    Alison Chapman, tax partner at Deloitte said: 'This will further discourage companies from having high emission cars on their fleet. As a result companies will have to reconsider some of the cars that they allow their employees to drive, as the increased cost of higher CO2 emission cars hits home, and the many 'user-chooser' fleets in this country will start being more selective. Smart companies will start to bring tax into their calculations of the whole life cost of the cars on their fleets.' And finally...

  • Beer to rise by 1p a pint from midnight on Sunday, cider by 1p a litre, wine by 5p a bottle and sparkling wine by 7p. Duty on spirits unchanged.

  • Cigarettes to rise by 11p a packet. VAT on nicotine patches to be cut from 17.5% to 5%.
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