Chancellor cuts National Insurance, extends fuel duty freeze and fully expenses leased assets

Chancellor cuts National Insurance, extends fuel duty freeze and fully expenses leased assets

Posted by

Kevin Blackmore

March 2024

In the last Budget before the General Election, Chancellor Jeremy Hunt unveiled a series of headline-grabbing initiatives aimed at boosting business and making UK workers feel better off. We summarise the key announcements and present commentary from Fleet Alliance CEO Andy Bruce.

National Insurance

The Chancellor announced a further 2p cut in the rate of National Insurance for full-time workers on top of the 2p reduction he announced at the Autumn Statement in November.

The new initiative takes effect from April 6. The fall from 10% to 8% equates to a £450 annual saving for the average worker and was intended to ‘make work pay’ for millions of UK workers, said Mr Hunt. The OBR said it was the equivalent of putting 200,000 more people in work.

For the self-employed, the Chancellor announced a further 2p cut from the main rate of NI on top of the 1p cut announced at the Autumn Statement.

From April 6, the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6% and combined with the abolition of the requirement to pay Class 2 NI, this will save an average self-employed person on £28,000 around £650 a year.

In addition, the Chancellor announced that the Government will launch a consultation later this year to deliver its commitment to fully abolish Class 2 National Insurance and remains committed to reforming this complex part of the tax system.

Andy Bruce: The move to reduce the tax burden on UK workers is to be warmly welcomed as it allows them to have greater control over their disposable income at a time when cost of living pressures have been intense. It gives them greater options and scope to consider, amongst other things, joining the electric revolution via a salary sacrifice scheme, the most cost-effective way of doing so.

Fuel duty cut extended

The Chancellor confirmed that the 5p cut in fuel duty, announced last year, will remain in force, thus saving drivers around £50 in fuel costs this year and £250 since it was introduced.

The move extends the freeze in fuel duty for a historic 14th year and avoids a 13% increase in fuel duty that might otherwise have come into force at the end of the month.

Since the start of the year, fleet operators have faced higher pump prices due to rising global oil prices. The extension to the 5p cut means that fuel duty remains at 53 pence per litre. The freeze on fuel duty is expected to cost the Treasury £5bn.

Andy Bruce: Consumers face uncertainties around food and energy costs, so it is good news that the Government has continued the fuel duty freeze and extended the 5p per litre price cut for another 12 months in a bid to combat these fluctuating costs. The price of fuel is a key component in the whole life costs equation and so this cut will go some way to helping keep cuts under control.

Fully expensed leased assets

Last Autumn, the Chancellor announced that all purchases of plant and machinery and IT equipment could be fully expensed by businesses against their Corporation tax bills for the next three years under a new policy.

Companies were effectively rewarded with up to 25p off their tax bill for every £1 that they invest, which amounted to a tax cut of over £10 billion per year, according to the Treasury.

Assets that were included were vans, lorries, tractors, office equipment and warehousing equipment such as forklift trucks and pallet trucks – but not cars.

Now, vehicle leasing companies will also be able to benefit from the so-called full expensing approach after Mr Hunt said he will publish draft legislation for full expensing to apply to leased assets.

However, it remains unclear whether cars will remain exempt, but the legislation will now give the tax break to leasing companies for vans and trucks they fund.

According to the BVRLA, the landmark shift in Government tax policy is poised to unlock up to £1bn worth of additional investment in commercial vehicles.

Andy Bruce: It’s excellent that the Government recognises that leasing is the funding route of choice for many businesses and makes a vital contribution to investment. The move will be welcomed by many businesses as it was seen as an anomaly when the announcement was first made. We would like to see the policy extended to include cars as well as vans, trucks and other leased assets.

EV disappointment

Before the Budget, there were strong calls for incentives for EVs to help the transition to net zero, including a cut in VAT on EV purchases and a reduction in the rate of VAT on public charging.

However, the Chancellor disappointed much of the fleet industry with no news of further incentives at a time when private EV sales have stalled and only fleet sales are continuing the movement to electrification.

According to the SMMT, February new car sales were the best for two decades. Registrations rose 14% to 84,886 units, marking the 19th month of consecutive growth.

However, the entirety of February’s increase was down to fleet and business registrations, with private uptake down 2.6% compared to February 2023. Year-to-date private sales are down by a worrying 11.4%.

When it came to charging infrastructure, campaigners had called for the abolishment of the VAT differential between public charging of 20% and home charging of 5%, describing it as an unfair and outdated policy hindering EV uptake among those without driveways.

Andy Bruce: The Government missed a gilt-edged opportunity to address the imbalance between fleet and private sales, especially in the crucial electric vehicle market, with a set of measures to incentivise EV uptake. In terms of EV charging, harmonisation of the two rates of VAT would have levelled the playing field and not discriminated against those who are unable to charge their vehicles at home due to a lack of off-street parking or a home charge point.

BIK rates on EVs

There was no new announcement on Benefit-in-Kind tax rates for EVs in the Budget as BIK rates for the next five years as it had already been announced that rates would gradually increase from the current 2% for 2023/24 to 5% by 2027/28.

Rates for all other vehicle bands will be increased by 1% for 2025-26 up to a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28.

Andy Bruce: Clarity on BIK rates on EVs encourages many drivers to switch to zero-emission motoring, whether they are company car drivers or employees benefiting from an electric car salary sacrifice scheme. This not only helps fleet planning but gives company car drivers reassurance that they will not suddenly face huge tax increases.

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