NGC Budget 2017 report: New car and fuel tax rates

Next Green Car's in-depth summary of the Chancellor's Budget 2017 as it affects vehicle tax, fuel duty, BIK rates and other motoring taxes.

Chancellor Philip Hammond made the following motoring-related announcements in the Spring Budget 2017 (extracts in italics):

Vehicle Excise DutyNEW RATES – As previously announced, Spring Budget 2017 confirmed the significant changes being made to the VED system for all cars registered from 01 April 2017. In addition to paying a First Year Rate based on CO2 emissions (as currently), all cars registered on or after 01 April costing under £40,000 will pay the same Standard Year Rate of £140, with those that cost £40,000 or more incurring an additional £310 for five years. Fully electric vehicles with a list price under £40,000 continue to be zero-rated and the £10 Alternative Fuel Vehicle discount remains from the previous system. For vehicles registered before 01 April 2017, the current tax system continues with VED rates increasing in line with the Retail Price Index (RPI).

Click here for new car tax rates from 01 April 2017

Diesel Vehicle TaxPOSSIBLE FUTURE MEASURE – In an unexpected announcement, the Treasury is considering a substantial review of diesel vehicle taxation; mainly in the light of growing NOx and air quality concerns. The government will consult on potential changes to diesel vehicle tax, with any changes potentially revealed in the Autumn Budget 2017. Budget wording: The government is committed to improving air quality... Alongside this, the government will continue to explore the appropriate tax treatment for diesel vehicles, and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017.

Fuel DutyFROZEN – Philip Hammond confirmed that the main fuel duty rates for petrol and diesel will continue to be frozen for the 2017-18 financial year. This means that fuel duty will have been frozen for more than seven years, the longest fuel duty freeze for more than 40 years. Fuel duty therefore remains at 57.95 pence per litre until further notice.

Red DieselCALL FOR EVIDENCE – The government will publish a call for evidence on the use of red diesel in order to improve understanding of eligible industries and current use. Evidence is particularly sought on the use of red diesel in urban areas (Ed: Its the NOx air quality issue again).

Company Car Tax 2016-20AS ANNOUNCED – All company car tax rates up to the end of the 2019-20 financial year are as previously announced. Budget wording: In both 2017-18 and 2018-19, the appropriate percentage of the list price of company cars subject to tax will increase by 2% for cars emitting more than 75 gCO2/km. In 2017-18, there will be a 4% differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands. In 2018-19, the differential in each case will reduce to 3%. (The differential will reduce further to 2% in 2019-20 in line with the Budget 2013 announcement).

Company Car Tax diesel supplementAS ANNOUNCED – The existing 3% diesel supplement to company car tax remains until 2021. Budget wording: As announced at Spending Review and Autumn Statement 2015, from April 2016 the 3% point differential between diesel cars and petrol cars will be retained until April 2021.

Company Car Tax for ULEVs 2016-21AS ANNOUNCED & CONFIRMED – Budget wording: From 6 April 2017, the graduated table of company car tax bands will provide for a 9% band for cars with emissions of 0-50 gCO2/km, a 13% band for cars with emissions of 51-75 gCO2/km... From 6 April 2018, there will be a 13% band for cars with emissions of 0-50 gCO2/km, a 16% band for cars with emissions of 51-75 gCO2/km... From 6 April 2019, the respective rates are 16% for cars with 0-50 gCO2/km and a 19% band for cars with 51-75 gCO2/km. Also confirmed are that the rates for 2020-21 for cars in the 1-74 gCO2/km with five new bands being introduced; for cars with CO2 emissions of 1-50 gCO2/km, the bands will be differentiated for BIK according to EV-only capability; ranging from 2% for cars with electric range of over 130 miles to 14% for those with less than 30 miles EV range.

Capital AllowancesCHANGE IN THRESHOLDS – From April 2018, the main rate threshold for capital allowances for business cars will be reduced to 110 gCO2/km, down from the current 130 gCO2/km. The 100% First Year Allowance (FYA) threshold will drop to 50 gCO2/km from the current 75 gCO2/km. This is to reflect falling average emissions for new cars on sale. The Budget also confirmed that FYA for businesses purchasing ultra low emission cars will be extended to April 2021. All elements will be reviewed in Budget 2019.

Insurance Premium Tax (IPT)2% INCREASE – Following on from October's increase in IPT to 10% from 9.5%, Philip Hammond has announced in the Spring Budget 2017 that it will rise a further 2% from 01 June 2017 to 12%.

Fuel Benefit Charge 2017-18INFLATION INCREASE – As previously announced, from 06 April 2017 the Fuel Benefit Charge multiplier for both cars and vans will increase by RPI.

Van Benefit Charge 2017-18INFLATION INCREASE – From 06 April 2017 the main VBC will increase by RPI. As previously announced, the government will continue VBC support for zero emission vans on a tapered basis. Budget wording: The government will extend VBC support for zero-emission vans so that the charge will be 20% of the main rate in 2017-18, and will then increase on a tapered basis to 5 April 2022. The government will review the impact of this incentive at Budget 2018 together with enhanced capital allowances for zero-emission vans.

Industrial Strategy Challenge FundNEW INVESTMENT – Almost certainly with Brexit in mind, the Chancellor today announced an initial investment of £270 million in 2017-18 will kick-start the development of disruptive technologies that have the potential to transform the UK economy. Following engagement with experts in academia and industry, the Budget announces that the first wave of challenges funded from the ISCF will include leading the world in the development, design and manufacture of batteries that will power the next generation of electric vehicles, helping to tackle air pollution.

Connected and Autonomous CarsNEW INVESTMENT – The Budget included £270 million for UK companies to develop "disruptive technologies", including driverless and connected cars, as well as electric vehicle battery technology. Continuing the investment theme for selected sectors, a first phase investment of £16 million will be dedicated to a new National 5G Innovation Network facility. National road and rail coverage will be developed, with 5G connectivity considered a crucial element in the development of connected and autonomous vehicles.

Air Quality and CongestionNEW INVESTMENT – In addition to exploring the appropriate tax treatment for diesel vehicles (see above), more than £100 million has been committed to improve traffic congestion hot spots. The North will see £90 million, and the Midlands will get £23 million, invested in the national road network. Local authorities in England will also be able to compete for part of a £690 million fund to tackle urban congestion and improve the effectiveness of transport networks. Further details will be announced in due course.

Northern Powerhouse Investment Fund (NPIF)NEW INVESTMENT – Building on Autumn Statement 2016 announcement of £1.1 billion from the NPIF to support local transport and £220 million to address pinch points on the national road network, the Spring Budget 2017 announces regional allocations of the £220 million NPIF investment for pinch points on the strategic road network, with details of individual schemes to be announced by Department for Transport shortly.

Click here for new car tax rates from 01 April 2017

Click here for company car tax rates from April 2017

Ben Lane

Author:Ben Lane
Date Updated:7th Mar 2017

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