Autumn Budget 2017: What motorists need to know
With wholesale changes to salary sacrifice, company car tax, and a further fuel freeze made in last year’s Autumn Statement, speculation has been somewhat quiet on any further plans for changes to the automotive industry as the dreaded B(rexit) word remains the main focal point of any and all spending.
One of the biggest rumblings last week was in a report by the Financial Times which speculated that Chancellor Philip Hammond was set to announce some kind of new tax for diesels, and it has now been confirmed that new diesel cars that don’t meet new real-world emission test standards will be subject to a tax increase from April 2018.
The fact that the chancellor used to buy and sell cars in Essex and was once a young man with a taste for fast cars had given some in the industry hope that we continue to be in good hands. Let’s see what exactly he announced…
VED changes for new diesels from April 2018
The Chancellor announced that the first year Vehicle Excise Duty (VED) rate for diesel cars that do not meet new real world testing emission standards will rise by one band in April 2018. This same tax hike will not apply to van owners in order to protect small businesses.
On top of this, the existing diesel supplement in company car tax will rise to 4%, with the proceeds going toward a new £220m clean air fund.
After initial confusion about which cars will be affected, the Treasury confirmed that a VED supplement will apply to new diesel cars first registered from 1 April 2018, so that their First-Year Rate will be calculated as if they were in the VED band above.
However, the supplement will not apply to the next generation of clean diesels – those which are certified as meeting emission limits in real driving conditions – in line with the new Real Driving Emissions standards (RDE2) tests.
But these tests are not likely to be in place before 2020, meaning most new diesels will face the one-off first-year tax rise from next year.
Fuel duty stays frozen
While a fuel duty rise for both petrol and diesel had been scheduled for April 2018, the Chancellor announced that it would remain frozen for an eighth consecutive year – to put that into monetary perspective the fuel duty freeze has saved typical driver around £160 per year.
While it has remained at the same level since March 2011, it still stands at a hefty 57.95p per litre which is the highest fuel duty in the European Union.
Investment in electric cars and wider infrastructure
The chancellor unveiled extra funds and tax incentives for electric car drivers. This includes:
- A new £400m charging infrastructure fund
- An extra £100m to the Plug-In-Car Grant
- £40m for research into charging
"I know Jeremy Clarkson doesn’t like them, but there are many other good reasons to pursue this technology so today we step up our support for it. Sorry Jeremy, not the first time you’ve been snubbed by Hammond and May," Mr Hammond joked.
Perhaps most interestingly, electric cars charged at work will not incur benefit in kind though whether that’s for the electricity or the car itself remains to be cleared up. If it is for the car itself, it is a shift toward the return of the company car in an EV guise.
Reacting to the increase in first-year VED for new diesel cars, BVRLA chief executive Gerry Keaney said: “This is a fair, well-signposted tax change that will encourage more drivers and fleets to look at alternative hybrid and petrol-powered new cars. Fleets across the UK will be breathing a sigh of relief that the chancellor has not increased the tax burden on commercial vehicle operators. This is the fair thing to do as they have no realistic alternative to using a diesel van or truck.”
However, on the decision to temporarily increase company car tax he commented: “Having previously promised that it was only looking to change the tax treatment for new diesel cars, the Government has gone back on its word by retrospectively raising the company car tax bill of hundreds of thousands of workers. […] Why should drivers at work be treated differently from other taxpayers?”
RAC head of external affairs Peter Williams said: “The Chancellor has chosen to be relatively light touch when it comes to taxing new diesel cars [while] current beleaguered owners of diesel cars can breathe a sigh of relief that they will not be punished further by the Treasury […] The side effect of today’s announcement however might be that there is a risk therefore that it might encourage some to stay with their older diesel vehicles.
“His decision to increase the diesel surcharge on company car tax appears to be more about revenue-raising rather than using tax to encourage drivers to opt for a particular type of vehicle.”
Andrew Mee, senior forecasting editor UK at cap hpi, stated: “The changes to VED announced for April 2018 will have little impact on widespread diesel values and new car registrations.
“The changes to VED will typically equate to increases of around £20 for the first year and will have very little impact on diesel registrations and values.
“The additional 1% diesel supplement on BIK will further encourage company car drivers to switch from diesel but the resulting fall in registrations will help to support used diesel values in the future.”
RHA chief executive Richard Burnett is extremely disappointed that the Chancellor failed to reduce fuel duty in today's Budget: “Fuel duty makes the UK less competitive - we have the highest fuel duty in Europe -nearly 50% higher than the European average. And despite the 7-year freeze, at 57.95 pence per litre, fuel duty remains grossly excessive. It has a negative effect on everything we buy and makes all UK made goods more expensive to transport.”
James Dower, senior editor of Black Book at cap hpi, said: “This is a forward looking Budget that shows the Government clearly recognises the need to invest in hybrid and EVs and is prepared to invest substantially.”
David Martell, chief executive of Chargemaster, said: “The £400m announced to support EV charging infrastructure is good news for charge point suppliers and operators such as Chargemaster, and we hope that some of this funding will be directed towards preparing network connections and reinforcing the electricity grid where required.
“The Chancellor’s clarification that employees who charge their electric car at work will not face any benefit-in-kind taxation is great news, both for EV drivers and employers, giving businesses even more reason to install charging points at their premises for their employee, fleet and company vehicles.”
Paul Morozzo, clean air campaigner at Greenpeace said: “Consumers need help to switch to electric vehicles, so this is a welcome investment. Investing more now means the UK could secure a leading share in the burgeoning electric vehicle technology market, bringing the UK revenue and skilled jobs.”