The Budget confirmed and built on the Chancellor’s measures in Budget 2008 and the Pre-Budget report by:
- Confirming the new rules on capital allowances linked to CO2 emissions
- Confirming and extending the overhaul of Vehicle Excise Duty Rates
- Increasing company car benefit in kind tax in the future for all but the lowest carbon cars
- Confirming future increases in fuel duty
- Introducing a vehicle scrappage scheme
- Confirming the recently announced support for ultra low carbon Cars and infrastructure
- Announcing new investment in de-carbonising electricity generation.
Capital Allowances
The CO2 based allowances announced in last year’s Budget were confirmed.
Vehicle Excise Duty (VED)
Reforms to VED have been confirmed as anticipated and the new 13-band system will come into effect from 1st May 2009. This is intended to provide a greater incentive for drivers to choose a lower-carbon car within the class of vehicle they prefer.
The new fuel economy label which confirms the new VED rates will be available for download from the Vehicle Certification Agency (VCA) website http://www.vcacarfueldata.org.uk/downloads/.
From April 2010 the new 13 bands will be further separated out to strengthen the environmental message and first-year rates of VED* will be introduced to further persuade new vehicle purchasers to choose lower emitting, more fuel efficient cars.
* From April 2010 anyone buying a new car will pay a different rate of vehicles tax in the first year of registration. From the second year of purchase onwards they will then pay the standard rate. This will send a stronger signal to the buyer about the environmental implications of their car purchase and will only apply to new cars, not second-hand cars.
Company Car Tax
The company car tax thresholds will tighten further with effect from 6th April 2011 by 5g per kilometre in addition to the 5g change announced last year, which takes effect from 6th April 2010.
The following abbreviated table demonstrates the progressive narrowing of the 15% band which serves to increase the taxation charge for the bands which follow.
The net effect is to increase the company car benefit in kind tax year by year on all vehicles except those emitting 120g CO2 per kilometre or less.
| 2009/10 |
2010/11 |
2011/12 |
| Emissions g/km |
% P11d value** |
Emissions g/km |
% P11d value** |
Emissions g/km |
% P11d value** |
| 120 |
10 |
120 |
10 |
120 |
10 |
| 121 – 139 |
15 |
121- 134 |
15 |
121 – 129 |
15 |
| 140 – 144 |
16 |
135 – 139 |
16 |
130 – 134 |
16 |
* +3% for diesel cars
From 2012/13 the scales will be reviewed, while retaining the incentive to purchase the lowest emitting vehicles. The company car tax bands will be extended so that they increase by 1% with every 5g CO2 per kilometre increase in emissions, in a linear manner from the 10% starting point.
Specific rates and thresholds will be announced in future budgets
Other detail changes from 6th April 2011 include:
- Drivers of Euro IV diesel cars registered before the 1st January 2006 are currently taxed at the same percentage rate as drivers of cars fitted with a petrol engine. The taxation of these cars will be subject to the 3% uplift for diesel cars from this date
- Discounts for alternative fuelled cars (e.g. LPG) will be abolished as will those for hybrids emitting 121g CO2 per kilometre or more
- The current £80,000 cap on vehicle P11d value will be removed, increasing the tax paid on the small number of company vehicles above this level
- Electric cars will continue to be subject to the 9% band
- Consideration will be given to abolishing the diesel supplement in company car tax for diesel cars which comply with the future Euro VI emission and air quality standards in advance of their planned introduction in 2014.
Company Car Fuel Benefit
No changes were announced to the fixed figure of £16,900 on which the benefit for ‘free’ fuel is based.
Fuel Duty
- Duty will rise by 2p per litre on 1st September 2009 and by 1p per litre in real terms on 1st April each year from 2010 to 2013
- On April 1st this year the main fuel duty rate increased by 1.84p per litre and the duty of rebated oils (e.g. biodiesel) rose in line with the main fuel duty rate
- The duty differential for compressed natural gas (CNG) was maintained and the duty differential for liquefied petroleum gas (LPG) was reduced by 1p per litre.
Vehicle Scrappage Scheme
A scheme was announced following considerable lobbying by the Society of Motor Manufacturers and Traders (SMMT), the British Vehicle Rental and Leasing Association (BVRLA) and other interested parties.
A £2,000 allowance will be available from mid May 2009 until the end of March 2010, or until the money for the scheme runs out. It is a voluntary arrangement which motor dealers must join and match the £1,000 provided by the Government. A number of manufacturers have announced their participation and some are further enhancing the terms of the scheme.
£300 million has been allocated to the scheme and the rules are as follows, the vehicle you are trading in must:
- Be a car or small van weighing up to 3,500kg
- Be first registered in the UK on or before 31st July 1999
- Either be registered or have a SORN (Statutory Off Road Notification) with the Driver and Vehicle Licensing Agency (DVLA) in your name
- Have been registered to you continuously for 12 calendar months before the order date of the new vehicle
- Have a UK address on the registration certificate (V5C)
- Have a current MOT test certificate before date of order for the new vehicle.
The new vehicle you want to buy must be:
- A car or small van weighing up to 3,500kg
- First registered in the UK on or after mid May 2009
- Declared new at first registration in the UK with no former keepers.
There are no emission limits to be adhered to and the scheme is expected to have a neutral or modestly positive environmental effect.
Ultra Low Carbon Cars
Today, less than 0.1% of the UK’s 26 million cars are electric. The Budget confirmed the recently announced proposals to encourage the uptake of electric and plug-in hybrid vehicles.
£20 million has been allocated to build a more comprehensive recharging infrastructure, help develop a network of ‘electric car cities’ throughout the UK and expand an electric and ultra low carbon car demonstration project.
From 2011, £250 million will provide grants of between £2,000 and £5,000 to consumers helping them purchase the next generation of electric and plug-in hybrid vehicles.
The timing of these grants coincide with the planned introduction of cars by major manufacturers which will meet modern safety standards and have a range and top speed sufficient to appeal to a wide audience.
What is a Plug-in hybrid?
Plug-in hybrids are cars which may be driven typically between 10 and 40 miles on battery power (recharged at home or at a charging station) before the engine (often referred to as a range extender) starts to ‘top up’ the battery. The engine on these vehicles may not be directly connected to the wheels at all, which allows a smaller engine to be fitted running at or near an optimum speed, further increasing efficiency and reducing emissions.
This electric only range is adequate for many commuting journeys and even where the engine is required for part of a journey the overall emissions are considerably lower than for a conventionally powered car.
Models anticipated for 2011 include a plug-in Toyota Prius and Vauxhall Ampera.
Greening the Grid
When large numbers of electric vehicles are on the road their overall contribution to reducing carbon emissions will depend to a large degree on the production of ‘clean’ electricity. Additional support was announced in this area, including £525 million to support offshore wind power generation and £60 million to fund carbon capture and storage technologies which could be fitted to future and existing coal fired power stations.
Source: The Energy Saving trust
The Energy Saving Trust will be the main sponsor for an annual event aimed at promoting the benefits of low carbon vehicles in April.
With a wider vehicle range and stronger charging infrastructure than 12 months ago, Nigel Underdown [pictured], the Energy Saving Trust’s Head of Transport Advice, believes that the show could further boost the popularity of low carbon strategies amongst senior fleet decision makers.
