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Summer Budget 2015: what could it mean for motorists?

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Author: | Updated: 07 Jul 2015 12:26

George Osborne has delivered many Budget announcements during his time as Chancellor of the Exchequer, but 2015’s emergency Summer Budget could be his most important yet.

It’ll be his first Budget since the Conservatives cleaned up at the General Election in May and without any interference from the Liberal Democrats, it could feature some ruthless cuts for certain sections of the UK.

How could motorists be affected though? They already cough up more than 10% of all UK tax, but could motorists be milked even more in the next Budget?

Note: This is a speculative piece, published before the Budget was announced.
Click here to see our round-up of the Summer Budget for everything that actually came to be…

M25 motorway - Photo - Highways Agency

Fuel duty

All eyes will be on fuel duty; translation: how much tax the Government slaps onto pump prices, currently just under 58p per litre.

There have been numerous scheduled rises over the years but they’ve been cancelled each time, and as it stands, fuel duty has been unchanged since the start of 2011; a point proudly mentioned during every Budget.

UK motorists pay more in fuel duty alone than UK firms and companies pay in business rates (£26.9bn compared to £26.8bn), and although September’s 1ppl has been cancelled, many still suspect that the Summer Budget could finally thaw the fuel duty freeze.

petrol fuel cap - PC - Highways Agency

Vehicle Excise Duty

A shake-up of the Vehicle Excise Duty (VED) structure is also possible.

VED, or ‘road tax’ as it is more commonly known, is determined by how much carbon dioxide a car produces. Any car that emits 100g/km of CO2 or less is effectively exempt from road tax.

Increasingly efficient engines means that the number of cars that qualify for £0 VED has been steadily rising for years; so much so that cars as large as Citroen’s C4 Grand Picasso bulky seven-seater can get in on the ‘free road tax’ party.

Fleets and private motorists already contribute more than £6bn in VED every year but after recent changes to the Congestion Charge and Islington Council’s decision to tax diesel drivers £96 a year to park in the borough, could now be the time that the Government tightens the threshold for free VED?

We already know that the £5k Plug-In Car Grant will go at the end of the year. Will there be any other measures announced that will effect drivers of electric and hybrid cars?

Citroen Grand C4 Picasso 2014

VAT

Value Added Tax (or VAT) on motoring-related fees could be increased too. These could include council-operated car parks, resident parking permits, penalty charge notices, bridge tolls, and car repairs.

Rather than simply bump up tax, the AA has called on the Chancellor to be more innovative and use existing taxes to influence motoring behaviour and help the UK meet CO2 targets in the process.

AA President Edmund King suggests pushing the idea of families having an electric vehicle as ‘the second family car’. Mile range, charging and the environmental profile of an electric car fits typical usage patterns more than any other, King believes, and a scrappage scheme would encourage take-up.

He also proposes a fiscal encouragement for converting the urban polluters to hybrid or electric alternatives, and extra funding to ease road congestion.

King comments: “If we gave up our cars, the country would collapse. A vehicle revolution is ‘in the wind’ but it needs to be further encouraged.

“Simply piling on more fuel duty when high pump prices undermine demand will backfire on the Government. It mirrors some London boroughs’ barely-disguised local tax grab from parking permit holders, and misses an opportunity to stimulate a green change in transport – and a tax windfall to help settle the country’s books.”

Salary sacrifice

Iain Carmichael, Chief Commercial Officer for salary sacrifice car scheme provider Tusker, emphasised that such programmes benefit the Government.

“By all means, review salary sacrifice employee benefits, but do not fall into the trap of thinking that they are all the same and costly to the Treasury,” he said.

“Unlike other benefits, salary sacrifice cars do attract taxation in the form of BiK taxes. A PwC report commissioned by Tusker demonstrated that, in the long term, the provision of salary sacrifice cars is tax positive to the Treasury.

“And this is before considering the additional tax revenues that accrue from the supply chain and the overall positive impact on the UK car industry - one of the major success stories of recent years.”

The exact details of the 2015 UK Summer Budget will be revealed on Wednesday 8 July at around 12.30.

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