Company car tax rises and fuel duty freeze for fleets in Budget 2015
The 2015 Budget had more than one eye on the General Election in a few weeks time as Chancellor George Osborne announced a series of measures designed to continue the feel-good factor for voters ahead of GE-day on 7 May.
The Chancellor has the benefit of a growing economy, set to increase by 2.5% this year, which allowed him to make a series of voter-friendly fiscal announcements, including an increase in personal allowances to £11,000 in two years’ time.
“A Budget for Britain, the come-back country,” said the Chancellor, referring to an economy that he said was stronger, with a deficit that was down, growth up, jobs up and living standards on the rise.
Regarding measures of interest for fleet operators, there was news of a freeze in fuel duty in September; of a 2% increase in company car tax for the next three years, and 3% thereafter; of new tax bands for ultra-low emission vehicles and of a rise in VED in line with inflation in the Chancellor’s sixth, and perhaps final, Budget speech.
The Chancellor confirmed that the fuel duty increase planned for September, due to be 0.54p per litre, would be cancelled, a move that was broadly welcomed. The combined impact of the ongoing duty freeze and the shelved increase will mean that the average family will save £10 every time the tank is filled.
“£10 off a tank from the Tories,” said the Chancellor.
In total, the Government says it will have eased the burden on motorists by £22.4 billion by the end of this tax year, a saving of £675 for a typical motorist, £1,400 for a small business with a van, and £21,000 for a haulier.
Government action on fuel duty since 2011 means that by the end of 2015-16 fuel duty will have been frozen for five years, the longest freeze since the mid-1990s.
Company car tax
As signposted previously by the Chancellor, company car tax goes up by 2% for the coming tax year 2015/16, and by the same amount for each of the next three years for all cars emitting more than 75g/km of carbon dioxide, up to a maximum of 37%, (see table).
However, the rate will increase by a further 3% in 2019-20; during this period, the rate for Ultra Low Emission Vehicles (ULEVs) would not rise as quickly.
The Budget also confirmed that two new tax bands for ULEVs come into force from April as ULEVs lose their tax free status for the first time.
The two new tax bands, at 1-50g/km and 51-75g/km of CO2, attract BIK rates of 5% for petrol models and 8% for diesel models for vehicles emitting 1-50g/km of CO2, and 9% for petrol and 12% for diesel for vehicles emitting 51-75g/km.
From next year, 2016/17, when the diesel surcharge is abolished, the tax rates become a standard 7% for all models emitting 1-50g/km and 11% for all models emitting 51-75%. This rises to 9% and 13% respectively in 2017/18, a move which many pundits have called a disincentive for buyers of electric and other ultra-low emission vehicles.
Company Car Tax BIK Rates 2015-2020
% BIK Rate
% BIK Rate
% BIK Rate
% BIK Rate
|2019-20% BIK Rate|
|Petrol||Diesel||All fuels||All fuels||All fuels||All Fuels|
|230 or above||37||37||37||37||37||37|
Vehicle Excise Duty
The Budget confirmed that VED rates for cars, motorcycles and the main rates for vans will increase from 1 April 2015 in line with the RPI.
VED Bands and rates for cars registered on or after 1 March 2001:
|VED Band||CO2 emissions (g/km)||Tax year 2015-16Standard rate||Tax year 2015-16First year rate|
|A||Up to 100||£0||£0|
As announced at Budget 2014, the need to have a paper tax disc displayed on a vehicle windscreen as proof of purchase of the appropriate VED has now been consigned to history. Drivers can now pay their VED by direct debit annually, biannually or monthly, should they wish to do so.
Following recent announcements in which Government-backed initiatives involving driverless cars were revealed in four cities, London, Bristol, Coventry and Milton Keynes, driverless cars were again singled out by the Chancellor for investment: £100 million has been earmarked for research and development into intelligent mobility.
The Treasury said that the cash will be used to focus on enhancing the development of driverless car technology and the systems required to implement and adopt the technology, such as telecommunications.
Enhanced capital allowances and first year allowances (FYA)
The 100% FYA for businesses purchasing the lowest emission vehicles has already been extended until 31 March 2018.
Budget 2015 confirmed that from April, the CO2 emissions threshold below which cars are eligible for the 100% FYA will be reduced from 95g/km to 75g/km.
The case for extending the FYA for cars beyond April 2018 is due to be reviewed at Budget 2016. There will also be a a review of the 130g/km main rate threshold for which Writing Down Allowances are available – at a rate of 18% per annum for cars with CO2 emissions of 96g/km-130g/km and 8% per annum for cars with CO2 emissions above 130g/km.
Last April, the first year allowance was withdrawn from car leasing companies. No further changes are due to be announced until 2016.
Car and van fuel benefit charge 2015-16
From April, the Fuel Benefit Charges, currently £21,700 for cars and £581 for vans, are due to increase by the Retail Prices Index (RPI) for both classes of vehicle.
Van benefit charge 2015-16
After setting the Van Benefit Charge at £3,090 in 2014-15, the Government increased it by the RPI from April 2015. From April, the five year exemption for zero carbon vans from the van benefit charge is already due to expire, as legislated in the Finance Act 2010.