Essential points from chancellor Alistair Darling's pre-budget report on vehicle excise duty (VED), fuel duty, capital allowances, employee car ownership schemes (ECOS) and the cut in VAT.
* the Pre-Budget Report confirms the introduction of new VED bands in 2009. However, there will be no significant rate changes until 2010, and no driver in any given band will pay more than £30 more in that year.
* from April 2009, six new bands of VED will be introduced, taking the total to 13. However, VED rates will not increase by more than £5 for any car in this year
* from April 2010, in order for the new bands to create an environmental incentive, the Government will start to separate out the 13 differential rates;
* from April 2010, a differential first-year rate for new vehicles will be introduced as announced in Budget 2008, in order to "provide a stronger signal to consumers at the point of purchase". The more polluting cars will see their duty increased up to a maximum of £30, not £90 as originally planned. Less polluting cars will see it stay the same or be cut
* cars that emit more than 225 g/km, but were registered between March 1, 2001 and March 23, 2006, will be moved into new band K in 2009 and stay there in 2010. This will mean they maintain their exemption from the top rate of VED
* Cars registered before 2001 – which account for around a third of the UK car parc – are not subject to these reforms, because comprehensive data on their CO2 emissions is not available. Instead, pre-2001 cars are subject to a separate VED regime, based on engine size.
* Both VED rates for cars and LCVs registered before March 1, 2001 will increase by £5 in 2009. In 2010, the higher rate will increase by £15 and the lower rate will be frozen.
* The standard VED rate for LCVs registered on or after March 1, 2001 will increase by £5 in 2009. The discounted rate for eligible light goods diesel vehicles achieving early compliance with Euro IV and V emissions standards will also be increased by £5. In 2010, the standard rate will be increased by £15 and the discounted rate will be frozen.
Vehicle Excise Duty for cars registered on or after March 1, 2001: current rates (2008-09)
*Alternative fuel discount: A-E £20, F-G £15
** Includes cars emitting over 225g/km registered between 1 March 2001 and 23 March 2006
Vehicle Excise Duty for cars registered on or after March 1, 2001: 2009-10 and 2010-11 standard rates
*Alternative fuel discount: 2009-10, A-I £20, J-M £15; 2010-11 onwards, £10 all cars
**Includes cars emitting over 225g/km registered between March 1, 2001 and March 23, 2006
Vehicle Excise Duty for brand new cars: 2010-11 first-year rates
Vehicle Excise Duty for private and light goods vehicles registered before March 1, 2001: 2009-10 and 2010-11 rates
Vehicle Excise Duty for light goods vehicles registered on or after March 1, 2001: 2009-10 and 2010-11 rates
*for Euro IV compliant vans registered between March 1, 2003 and December 31, 2006
**for Euro V compliant vans registered between January 1, 2009 and December 31, 2010
* Fuel duty increases continue so as to offset the VAT decrease. From Monday duty for unleaded petrol and diesel will be increased by 2 pence per litre (ppl). These rates will be further increased on April 1, 2009 by 1.84 ppl, and on April 1, 2010 by 0.5 ppl above indexation in that year.
Capital allowances for business cars
The PBR confirmed the government’s intention to modernise the tax relief for business expenditure on cars.
The existing arrangements will be replaced by an emissions-based system, taking effect from April 1, 2009 for corporation tax and April 6, 2009 for income tax. A technical note and draft legislation setting out the full detail will be published shortly.
The 2006 Budget announced an HMRC review into the taxation of employee car ownership schemes (ECOS). The summary of the report was published today. The government has decided not to impose a speci?c tax on ECOS, or alter the structure of AMAPs at the current time, but to "continue to provide a clear and simple system for business and employees".
Disabled company car drivers of automatic cars are able to use the carbon dioxide emissions figure of an equivalent manual car when calculating their company car tax charge. From April 6, 2009 these drivers will also be able to use the list price of an equivalent manual car when calculating their company car benefit charge.
* £3bn of capital spending projects will be brought forward, including motorway-building projects and fuel duty to increase
* Inflation will come down to 0.5% by the end of 2009
* The UK economy will grow by 1.5 to 2% in 2010
* £20bn fiscal stimulus will be introduced between now and 2010
* Borrowing will rise to 8% of GDP next year
* £3bn of capital spending projects will be brought forward including motorway-building projects
* VAT will be cut from 17.5% to 15% until the end of next 2009 - this will come into effect next Monday (Dec 1). This is the equivalent, for the average household, of £275 a year for extra spending. The new rate will apply until December 31, 2009, when it will revert to 17.5%. Only standard-rated sales are affected. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions.
* "We would like retailers to pass this on as soon as they can"
* Income tax changes become permanent and will be increased
* "By 2011 economy will be in recovery"
* National Insurance will increase in 2011 by 0.5%
* No one earning under £20k will pay NI
* From April 2011 those earning over £100k will pay new 45% income tax rate
* All business taxes payable by SMEs will be spread on an ability-to-pay basis
* £1bn credit through a new SME government lending scheme
* Small companies' corporation tax changes have been deferred