Budget 2016: Fuel duty frozen for sixth year running
Chancellor George Osbourne has revealed fuel duty is set to be frozen for the sixth year running in the Budget 2016, but there will also be an increase in Insurance Premium Tax, and announced that driverless cars are to be tested on Britain’s motorways.
A rise based on inflation has been pencilled in, but the Chancellor pledged to save the average driver upwards of £75 a year – and small business drivers could save as much as £270 by freezing the tax on diesel and petrol.
As expected, Insurance Premium Tax was raised by 0.5% to 10%, with the extra £700 million expected to be raised going exclusively towards flood defences. Although it sounds small, the extra costs to insurers will likely be passed on via higher insurance premiums. Breakdown cover is also set to rise.
“Let’s be clear about this, Insurance Premium Tax is a tax collected and remitted by insurers, it is a tax on premiums paid by policyholder – motorists, householders, and businesses large and small. Whilst we support the additional spending on flood defences we believe that this could have been funded by the projected £1.5 billion annual funds paid to the exchequer as a result in the increase in IPT put in place only last November which puts an increased burden on policyholders, many of whom are suffering from ongoing flood damage.” – Steve White, British Insurance Brokers Association CEO (via Auto Express)
The Chancellor also expected outlined plans for trials of fully autonomous vehicles on British roads in 2017 to help to “lead the world in new technologies and infrastructure”. He had already stated that “driverless cars could represent the most fundamental change to transport since the invention of the internal combustion engine”, but also he acknowledged that safety is essential – and that’s what the trials will test. The trials are set to be funded by the government’s £100 million Intelligent Motability Fund.
The CO2 threshold for the lease rental restriction is linked to the threshold for capital allowances for business cars, so the rate is to be reduced to 110g/km CO2 from April 2018 to March 2021. This is to apply to expenses incurred on the hire of a car above this CO2 emission threshold on/after the 1st April 2018 for corporation tax and the 6th April 2018 for income tax. The 100% First Year Allowance for businesses purchasing low emission cars has been extended for a further three years to April 2021, however there is to be no change to the bar on leased cars from receiving such allowances. The threshold will be reduced to 50g/km CO2 from April 2018.
“It’s unsurprising that the Chancellor wants to reduce the main rate threshold for capital allowances for business cars from 130g/km CO2 to 110g/km, and we welcome the advance notice he has provided.
“It is also pleasing to see the Chancellor extend 100% First Year Allowances for businesses purchasing ultra low emission cars for a further three years until 2021, though yet again he has ignored our calls to make this benefit available for companies that lease their cars. This unfairly discriminates against SMEs who rely on lease arrangements to access new low emission cars, and instead favours cash-rich businesses who can afford to purchase cars outright.” – BVRLA comment
It has also been announced in the Budget 2016 that the government is considering limiting the range of benefits that attract advantages to income tax and NIC as a part of salary sacrifice schemes – pension-saving, childcare and healthcare benefits will continue to have relief, however cars could face scrutiny over the remainder of the year.
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