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Partial reprieve for salary sacrifice as fuel duty frozen and company car tax changes announced

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The fleet industry has won a partial reprieve on salary sacrifice, with ultra-low emission vehicles (ULEVs) being excluded from changes announced today in the autumn statement.

The Chancellor Philip Hammond also froze fuel duty and, to provide stronger incentives for the adoption of ULEVs, announced new company car tax bands for the lowest emitting cars.

Following a consultation on salary sacrifice, Hammond said that the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ULEVs. “This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income,” said the Treasury.

“Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.”

Lauren Pamma, head of consultancy at Lex Autolease, told Fleet News: “We welcome the decision from the Government to remove ultra-low emission vehicles from the changes to salary sacrifice. We will be carefully reviewing the detail announced today to evaluate the full impact.”

However, Colin Tourick, professor of automotive management at the University of Buckingham, believes there will be a general sense of shock in the industry that the chancellor has changed the arrangements for taxing salary sacrifice schemes.

“You can see why he has done it,” said Tourick. “He expects to raise more than £230 million per annum once the new system has bedded in in 2018-19.

"However, all is by no means lost for the fleet industry and those employees who have salary sacrifice cars or planned to have them. People already sacrificing salary will continue to enjoy the benefits for four years.

“We can expect a huge rush in salsac registrations between now and 5 April, when the new rules come into force. And employees can continue to enjoy the benefits of salsac if they choose an ultra-low emission car, which is no great hardship as there is now a good selection of sub-75g/km cars on the market, with more to come soon.”

He concluded: “All in all, whilst this is not the outcome the industry was hoping for it’s by no means a disaster.”

New company car tax bands

In terms of company car tax, there will be a change to the appropriate percentage banding structure used in establishing the taxable benefit for ULEVs.

The appropriate percentages for zero emission cars will be 2%, while those for cars with CO2 emissions between 1g/km and 50g/km will vary between 2% and 14% depending on the number of zero-emission miles the vehicle can travel.

The measure also increases appropriate percentages by 1 percentage point to a maximum value of 37% for cars with CO2 emissions of 90g/km and above. The measure will be effective from April 2020.

Support for plug-in cars

Hammond also announced the Government will invest a further £390 million by 2020-21 to support ULEVs, renewable fuels, and connected and autonomous vehicles (CAVs). This includes £80m for ULEV charging infrastructure, £150m in support for low emission buses and taxis, £20m for the development of alternative aviation and heavy goods vehicle fuels, and £100m for new UK CAV testing infrastructure.

In addition to the tax incentives for ULEVs in company tax and salary schemes, from today to the end of March 2019 the Government will also offer 100% first-year allowances to companies investing in charge-points for electric vehicles.

Chris Chandler, principal consultant at Lex Autolease, said: “Take up of electric vehicles has surged over the last two years as financial incentives increased affordability and established the UK as a leader in green vehicle technology.

“Despite the growth, ultra-low emission vehicles still make up a tiny percentage of cars on the road. The decision to extend these measures with a share of £390m announced to invest in Low Emission Vehicles is welcomed and should see further growth as businesses look to reap the benefits of adding electric vehicles to their fleets.”

Investment in infrastructure

Hammond announced the Government will provide an additional £1.1 billion by 2020-21 in new funding to relieve congestion and deliver “much-needed” upgrades on local roads and public transport networks.

On strategic roads, an extra £220 million will be invested to tackle key pinch-points.

LeasePlan UK's managing director Matt Dyer said: “It's promising to hear that the Treasury is set to invest in the English road infrastructure.

“With the decision made weeks ago to back a third runway at Heathrow, the Government can now focus on getting the economy ‘match fit’, particularly in the example of potential new road and rail links between Oxford and Cambridge.

“By pledging this kind of investment, the Government is securing the provision for a better connected and more dynamic infrastructure that suits both the needs of people and businesses.” 

Fuel duty freeze and IPT increase

There was also welcome news for fleets with the Chancellor announcing a continuing freeze on fuel duty.

It is the seventh successive year it has been frozen, saving motorists around £130 a year compared to what they would have been paying under the pre-2010 escalator.

Dyer said: “Not only will this help UK motorists, it will also be a continued reprieve to those who work in logistics, with light commercial vehicles expected to save an estimated £350 per year.”

However, while welcoming the freeze, James Monks, finance director at vehicle tracking service provider at RAM Tracking, added: “Despite the freeze, fuel prices are expected to continue to rise and costs have been impacted by a 19% pump price increase since February 2016. While many fleet managers would have hoped for a cut in duty to compensate for this, the freeze will at least allow them some scope to invest in other activities which should be a priority, such as technologies which encourage drivers to act more safely and drive more sustainably.”

Finally, the Chancellor also announced that the standard rate of Insurance Premium Tax (IPT) will rise to 12% from June 1, 2017. IPT is a tax on insurers and so any impact on premiums depends on insurers’ commercial decisions.




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  • Sage & Onion - 24/11/2016 14:32

    Has the Chancellor actually announced exactly what the new company car tax bands are for 2020/21 or is he just teasing us? I can't find any detail anywhere and I have drivers who may want to take these cars now on 4 year contracts but won't know their tax liability in the last year of the contract. As per the statement below. "The appropriate percentages for zero emission cars will be 2%, while those for cars with CO2 emissions between 1g/km and 50g/km will vary between 2% and 14% depending on the number of zero-emission miles the vehicle can travel."

    • Sage & Onion - 24/11/2016 14:34

      I'm referring to the ULEV's between 1 and 75g/km.

    • Christopher Smith - 24/11/2016 14:35

      Not yet, no - we are expecting this with the Finance Bill in early December so will keep readers informed.

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