Expert analysis on the important changes for company vehicles.
On 8th March 2017, the Chancellor announced this year's Spring Budget. Following the announcement of a number of measures affecting vehicle fleets in the Autumn Statement 2016, the Spring Budget contained few surprises for company car drivers and Fleet Managers.
As experts in company vehicles and fleet management, with extensive experience in analysing the Chancellor's Budgets, here's our rundown of what the announcements mean for your organisation.
The Chancellor announced a £220m fund to tackle pinch-points on the national road network, of which £90m will be allocated for the North and £23m for the Midlands. In addition, a £690m competition for local authorities across England to tackle urban congestion was announced.
This follows announcements made in the Autumn Statement, which included:
- £80m towards the charging infrastructure for Ultra Low Emission Vehicles (ULEVs)
- £40m for plug-in grants
- 100% first-year allowances for companies investing in charge-points for electric vehicles until the end of March 2019
- £100m to be invested in new Connected and Autonomous Vehicle (CAV) infrastructure.
The Chancellor announced changes to ensure that ‘employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income’. This includes employees who are able to exchange a cash allowance for a company car.
This means that for vehicles delivered after April 2017, with the exception of ULEVs, currently 75g/km or less, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed. While the good news is that ULEVs are excluded, for employers, there could be an additional administrative burden on payroll. Employees with vehicles provided before 6th April 2017 will be protected from these changes until April 2021, or until they change their vehicle if that is earlier, as the benefit in kind value of company cars will be calculated based on the list price and CO2 rating percentage and not the cash alternative or salary sacrificed.
While this protection is positive, an increase in Insurance Premium Tax from 10% to 12% to be introduced in June 2017 will also impact on the costs of salary sacrifice arrangements.
To support organisations in managing these changes, Lex Autolease can model the potential impact on employees, as well as employers, and provide support to implement the changes.
If you have an existing salary sacrifice scheme or a traditional company car scheme where the employee can elect for either cash or a company car, we'd recommend the new legislation is communicated to your business so that employees can make an informed choice when selecting their next vehicle. Companies could also review their existing salary sacrifice and company car schemes to include more ULEVs in the policy.
A £270m investment to help keep the UK at the forefront of disruptive technologies was announced, with the Chancellor specifically referring to driverless cars.
The enhanced connectivity of today's vehicles will also be supported by the announcement of a £16m investment in 5G technology.
Vehicle Excise Duty for hauliers was frozen and the Chancellor announced that there will be no change to the HGV road user levy, which will be of some comfort to many of our commercial customers.
However, the changes to company vehicle taxation that were announced in the Autumn Statement will see the introduction of new lower tax bands for the lowest emitting ULEVs from April 2020, with the introduction of an additional 15 new bandings of which 11 will be for ULEVs.
We'd recommend companies review their company car schemes in line with the Government's green agenda to include more ULEVs to offset the impact of this legislation.
Please get in touch with our team to discuss further.
|CO2 emissions (g/km)||Taxable percentage of list price*|
|1||9||13||16||(see table below)|
Emission figures for vehicles are rounded down. *Diesel supplements: add 3% subject to a maximum charge of 37%.
ULEV Taxation for 2020/2021
|CO2 emissions (g/km)||Mileage capability||Taxable percentage of list price|
|1-50||More than 130 miles in zero emission mode||2|
|1-50||Under 30 miles||14|
We'd recommend companies review their company car schemes in line with the Government's green agenda to include more ULEVs to offset this new legislation.
Please get in touch with our team to discuss further.
The Government's commitment to promoting the green agenda played out across both the Autumn Statement and the Spring Budget, with incentives for ULEVs and funding for charging infrastructure. Despite speculation, the Government has committed to consulting with stakeholders before making a decision on future taxation for diesel vehicles, with an announcement expected during the Autumn Budget in November 2017.
The continued freeze on fuel duty for the seventh consecutive year is to be welcomed. Given the rise in oil prices and depreciation of Sterling, this will be a relief for motorists who will save an average £130 each year compared to what they would have been paying under the pre-2010 escalator, rising to a saving of £350 for van drivers.
While the continued freeze of fuel duty is good news, recent pump price increases will have impacted on fleet operating costs. With fuel being the 2nd highest cost in fleet, company fuel expenditure and associated expenses processes should be regularly reviewed, to maximise fuel efficiency and encourage appropriate driver behaviour.
The Finance Bill, originally published in draft form in December, will be finalised on 20th March 2017. To help customers understand the changes and how they can mitigate the impact for their organisations, we are hosting two webex meetings on 21st and 22nd March – please contact your account management team for registration details.
We hope that you have found our analysis of the Chancellor's announcements helpful. Please get in touch with our team to discuss any of the issues covered – we're here to help you run your fleet more effectively.
Whilst every effort has been made by Lex Autolease to ensure that information given is not misleading, this material is provided only as an overview of the subject and is not a substitute for professional advice. No responsibility can be accepted by Lex Autolease for any loss nor liability occasioned by any person acting or refraining from action as a result of this website page.