Little for fleets to cheer about in 2010 budget
24 March 2010
Chancellor Alistair Darling's ‘Budget for recovery’ contained little new for fleet operators, other than the phased introduction of the much publicised 3p per litre increase in fuel duty, which will now be brought in over the next nine months rather than being introduced from April. But other than that, with BIK taxation, NICs and Vehicle Excise Duty all to increase by varying amounts from next month, there was little encouragement for fleet managers.
One of the few things that was new was the Chancellor’s tax incentive for company drivers who opt for ultra-low emission cars. From April, the new incentive means those who opt for an ultra-low emission car will pay just 5% BIK.
However, cars that qualify for the new tax breaks – those that emit between one and 75g/km of CO2 – are still months away from being available. The plug-in version of the Toyota Prius is likely to be the first and this will not be available until late-2011 at the earliest.
At the same time, company drivers who opt for a zero-emission electric car will pay no BIK tax for five years from April, as previously announced in the Pre-Budget Report
“The Chancellor’s decision to halve company car tax for ultra-low carbon cars is a green gesture, but there are no viable cars at the moment emitting less than 75g/km so this is definitely an incentive for the future,” said Fleet Alliance managing director, Martin Brown.
“Before the Budget, I said I’d like to see the removal of the 3% surcharge that diesel car drivers pay, which I feel is really unjust. But that remains in place, while the fuel escalator has been re-introduced and will have an inflationary effect on all fleet operating costs, even if it is being phased in rather than introduced all in one go.”
One of the biggest rises facing fleet operators will be in road tax or Vehicle Excise Duty. Last April the number of road tax bands was increased from seven to 13, designated A-M. The rates varied from £0 (Band A) for cars with CO2 emissions up to 100g/km to £440 (Band M) for cars with CO2 emissions over 255g/km.
However from this April, a new first year road tax rate is being introduced. Low emission cars - up to 130g/km will pay £0 - while the highest emission cars (over 255g/km) will pay £950, a move dubbed as a ‘showroom tax’ by much of the media as the Government seeks to discourage the uptake of the highest polluters– see table.
The standard rate of road tax in 2010/11 for cars already registered is also shown in the table.
The new rates make cars over 160g/km particularly unattractive for companies to operate, and rise progressively more steeply as their carbon emissions increase. Cars at the higher end of the carbon scale face particularly onerous charges from the start of next month.
Martin Brown said: “This year’s Budget merely serves to underline how important good fleet planning is, and that now is the time for fleet operators to review the models they will have on the fleet for the next three years as there are major financial incentives to pick the right models.
“The increases in taxes such as BIK and NIC, many of which were announced in the Pre-Budget Report and confirmed by the Chancellor this week, will increase the need for tighter control by fleet managers, especially in the areas of fuel cost control, vehicle acquisition choice and better mileage management.
“There is little doubt that this Budget adds to the already considerable inflationary pressures that UK companies are facing. Tighter control of fleet costs, more targeted vehicle acquisition and model planning and better mileage management are now vitally important to maintain profit margins.
“The reforms to the BIK company car tax system confirmed by the Chancellor in the Budget increase carbon emission benchmarking by 1% per annum. This is a very clear signal to fleets to select low emission, more environment friendly vehicles if they wish to control their BIK and Corporation Tax liabilities,” he said.
24 March 2010
Chancellor Alistair Darling's ‘Budget for recovery’ contained little new for fleet operators, other than the phased introduction of the much publicised 3p per litre increase in fuel duty, which will now be brought in over the next nine months rather than being introduced from April. But other than that, with BIK taxation, NICs and Vehicle Excise Duty all to increase by varying amounts from next month, there was little encouragement for fleet managers.
One of the few things that was new was the Chancellor’s tax incentive for company drivers who opt for ultra-low emission cars. From April, the new incentive means those who opt for an ultra-low emission car will pay just 5% BIK.
However, cars that qualify for the new tax breaks – those that emit between one and 75g/km of CO2 – are still months away from being available. The plug-in version of the Toyota Prius is likely to be the first and this will not be available until late-2011 at the earliest.
At the same time, company drivers who opt for a zero-emission electric car will pay no BIK tax for five years from April, as previously announced in the Pre-Budget Report
“The Chancellor’s decision to halve company car tax for ultra-low carbon cars is a green gesture, but there are no viable cars at the moment emitting less than 75g/km so this is definitely an incentive for the future,” said Fleet Alliance managing director, Martin Brown.
“Before the Budget, I said I’d like to see the removal of the 3% surcharge that diesel car drivers pay, which I feel is really unjust. But that remains in place, while the fuel escalator has been re-introduced and will have an inflationary effect on all fleet operating costs, even if it is being phased in rather than introduced all in one go.”
One of the biggest rises facing fleet operators will be in road tax or Vehicle Excise Duty. Last April the number of road tax bands was increased from seven to 13, designated A-M. The rates varied from £0 (Band A) for cars with CO2 emissions up to 100g/km to £440 (Band M) for cars with CO2 emissions over 255g/km.
However from this April, a new first year road tax rate is being introduced. Low emission cars - up to 130g/km will pay £0 - while the highest emission cars (over 255g/km) will pay £950, a move dubbed as a ‘showroom tax’ by much of the media as the Government seeks to discourage the uptake of the highest polluters– see table.
The standard rate of road tax in 2010/11 for cars already registered is also shown in the table.
| Road tax Band |
CO2 emissions g/km |
2009-10 standard rate |
2010-11 | |
| First year rate |
Standard Rate |
|||
| A | Up to 100 | 0 | 0 | 0 |
| B | 101-110 | 35 | 0 | 20 |
| C | 111-120 | 35 | 0 | 30 |
| D | 121-130 | 120 | 0 | 90 |
| E | 131-140 | 120 | 110 | 110 |
| F | 141-150 | 125 | 125 | 125 |
| G | 151-160 | 150 | 155 | 155 |
| H | 161-170 | 175 | 250 | 180 |
| I | 171-180 | 175 | 300 | 200 |
| J | 181-200 | 215 | 425 | 235 |
| K | 201-225 | 215 | 550 | 245 |
| L | 226-255 | 405 | 750 | 425 |
| M | Over 255 | 405 | 950 | 435 |
The new rates make cars over 160g/km particularly unattractive for companies to operate, and rise progressively more steeply as their carbon emissions increase. Cars at the higher end of the carbon scale face particularly onerous charges from the start of next month.
Martin Brown said: “This year’s Budget merely serves to underline how important good fleet planning is, and that now is the time for fleet operators to review the models they will have on the fleet for the next three years as there are major financial incentives to pick the right models.
“The increases in taxes such as BIK and NIC, many of which were announced in the Pre-Budget Report and confirmed by the Chancellor this week, will increase the need for tighter control by fleet managers, especially in the areas of fuel cost control, vehicle acquisition choice and better mileage management.
“There is little doubt that this Budget adds to the already considerable inflationary pressures that UK companies are facing. Tighter control of fleet costs, more targeted vehicle acquisition and model planning and better mileage management are now vitally important to maintain profit margins.
“The reforms to the BIK company car tax system confirmed by the Chancellor in the Budget increase carbon emission benchmarking by 1% per annum. This is a very clear signal to fleets to select low emission, more environment friendly vehicles if they wish to control their BIK and Corporation Tax liabilities,” he said.
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