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Budget 2012: fuel prices and car tax to rise

Budget 2012 - petrol prices Despite average UK fuel prices currently being at a record 139.95p per litre of unleaded petrol and 146.54p per litre of diesel, the
2012 Budget
confirmed that the 3.02p per litre fuel duty increase (plus VAT) scheduled for 1 August 2012 will go ahead.

Vehicle Excise Duty (VED) rates will also increase on 1 April 2012.

Drivers of company cars with a zero CO 2 rating – electric cars – will continue to benefit from a 0% benefit-in-kind tax charge; while the 1-75g/km tax threshold remains at 5%; and the 76-99 g/km threshold at 10%.

From April 2013 the carbon dioxide emissions threshold for the main rate of capital allowances for business cars will reduce from 160 g/km to 130 g/km.

Also, from April 2015, the five-year exemption for zero carbon and ultra low carbon emission vehicles will come to an end.

Vehicle Excise Duty

On 1 April 2012 Vehicle Excise Duty
(VED) rates will increase in line with the RPI, apart from VED rates for Heavy Goods Vehicles which will be frozen in 2012–13.

Vehicle Excise Duty from April 1 for cars registered on or after 1 March 2001

VED

Band

CO
2
emissions

g/km

2012-13

First year rate*

Standard

rate*

A

Up to 100

0

0

B

101-110

0

20

C

111-120

0

30

D

121-130

0

100

E

131-140

120

120

F

141-150

135

135

G

151-165

170

170

H

166-175

275

195

I

176-185

325

215

J

186-200

460

250

K**

201-225

600

270

L

226-255

815

460

M

Over 255

1,030

475

*Alternative fuel discount 2010-11 onwards £10 all cars

** Includes cars emitting over 225 g/km registered before March 23, 2006

Vehicle Excise Duty for private and light goods vehicles
registered on or after March 1, 2001 (not over 3,500kg revenue weight) – £215

Euro 4 light goods vehicles registered between March 1, 2003 and December 31, 2006 only (not over 3,500kg revenue weight) – £135

Euro 5 light goods vehicles registered between January 1, 2009 and December 31, 2010 only (not over 3,500kg revenue weight) – £135

In addition, the Government has said that it will consider whether to reform VED over the medium term to ensure that all motorists continue to make a fair contribution to the sustainability of the public finances, and to reflect continuing improvements in vehicle fuel efficiency.

Also, the Government aims to develop a direct debit system to allow motorists to spread their VED payments. The Government will seek the views of motoring groups on these measures.

Company car tax

The Government has already announced major changes in company car tax with the abolition from April 6 of the so-called Qualifying Low Emission Car (QUALEC) category.

It means that the lower end of the system has been revised, which will see the scale charges ranging from 10% to 35% (see table below) instead of 15% to 35%.

Drivers of company cars with a zero CO 2 rating – electric cars – will continue to benefit from a 0% benefit-in-kind tax charge; while the 1-75g/km tax threshold remains at 5%; and the 76-99 g/km threshold at 10%. There also remains in place for 2012/13 a 3% tax surcharge for drivers of diesel cars.

However, while company car benefit-in-kind tax changes were also already known for the 2013/14 financial year, the Budget documents have revealed significant changes for the following three financial years – 2014/15, 2015/16 and 2016/17.

The changes are as follows:

  • ?
    The appropriate percentage of list price subject to tax will increase by one percentage point for cars emitting more than 75 g/km of carbon dioxide, to a maximum of 35% in 2014/15, and by two percentage points, to a maximum of 37% in both 2015/16 and 2016/17 (see chart below).
  • ?
    From April 2015, the five-year exemption for zero carbon and ultra low carbon emission vehicles will come to an end. The appropriate percentage for zero emission and low carbon vehicles will be 13% from April 2015 and will increase by two percentage points in 2016/17. The Budget papers made no specific mention of the separate tax treatment of zero emission electric cars referring only to ‘petrol fuelled cars’ and ‘diesel fuelled cars’ for tax years 2015/16 and 2016/17.
  • ?
    From April 2016, the Government will remove the 3% diesel supplement differential so that diesel cars will be subject to the same level of tax as petrol cars.
  • ?
    The Government will exclude certain security enhancements from being treated as accessories for the purpose of calculating the cash equivalent of the benefit on company cars made available for private use. The changes take effect retrospectively from April 6, 2011.
  • ?

% of P11D

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

Price

CO
2
(g/km)

CO
2
(g/km)

CO
2
(g/km)

CO
2
(g/km)

CO
2
(g/km)

CO
2
(g/km)

0

0

0

0

0

N/A

N/A

5

1-75

1-75

1-75

1-75

N/A

N/A

10

76-120

76-99

76-94

N/A

N/A

N/A

11

N/A

100-104

95-99

76-94

N/A

N/A

12

N/A

105-109

100-104

95-99

N/A

N/A

13

N/A

110-114

105-109

100-104

0-94

N/A

14

N/A

115-119

110-114

105-109

95-99

N/A

15

121-129

120-124

115-119

110-114

100-104

0-94

16

130-134

125-129

120-124

115-119

105-109

95-99

17

135-139

130-134

125-129

120-124

110-114

100-104

18

140-144

135-139

130-134

125-129

115-119

105-109

19

145-149

140-144

135-139

130-134

120-124

110-114

20

150-154

145-149

140-144

135-139

125-129

115-119

21

155-159

150-154

145-149

140-144

130-134

120-124

22

160-164

155-159

150-154

145-149

135-139

125-129

23

165-169

160-164

155-159

150-154

140-144

130-134

24

170-174

165-169

160-164

155-159

145-149

135-139

25

175-179

170-174

165-169

160-164

150-154

140-144

26

180-184

175-179

170-174

165-169

155-159

145-149

27

185-189

180-184

175-179

170-174

160-164

150-154

28

190-194

185-189

180-184

175-179

165-169

155-159

29

195-199

190-194

185-189

180-184

170-174

160-164

30

200-204

195-199

190-194

185-189

175-179

165-169

31

205-209

200-204

195-199

190-194

180-184

170-174

32

210-214

205-209

200-204

195-199

185-189

175-179

33

215-219

210-214

205-209

200-204

190-194

180-184

34

220-224

215-219

210-214

205-209

195-199

185-189

35

225+

220+

215+

210+

200-204

190-194

36

N/A

N/A

N/A

N/A

205-209

195-199

37

N/A

N/A

N/A

N/A

210+

200+

  • ?
    Up to the end of tax year 2014/15 add 3% for diesel cars up to a maximum of 35%
  • ?
    For tax year 2015/16 add 3% for diesel cars up to a maximum of 37%
  • ?
    In 2016/17 petrol and diesel cars are treated equally for company car tax purposes.

Car fuel benefit charge (FBC) 2012/13 and 2013/14

Employees who are in receipt of company-funded fuel used privately will see their benefit-in-kind tax bills rise from April 6.

The Chancellor announced in the Budget that the FBC multiplier for company cars will increase from £18,800 to £20,200, and will increase by 2% above the RPI in 2013/14. The Government also committed to pre-announcing the FBC multiplier one year ahead.

Van benefit charge

The Government has frozen the van benefit charge at £3,000 in 2012/13.

From April 2015, the five-year exemption for zero emission vans from the van benefit charge will expire.

Van fuel benefit charge (FBC) 2012/13 and 2013/14

From April 6, the van FBC multiplier has been frozen at £550, but will increase by the RPI in 2013/14. The Government has also committed to pre-announcing the FBC multiplier one year ahead.

Capital Allowances

HM Treasury has confirmed that the previously announced reduction in the main rate of capital allowances on plant and machinery, which includes vans and cars, will come into effect for the 2012/13 financial year with rates frozen for 2013/14.

While continuing to adhere to the system introduced in 2009, which offers enhanced rates for lower emission vehicles, and the separation of vehicles into three pools depending on their emissions, the Government is lowering the rates of reclaim by 2% on vehicles with emissions above 110g/km.

Companies purchasing cars with emissions of 110g/km or below can continue to write down the full cost of vehicles against their taxable profits in the first year of ownership

Companies purchasing cars with emissions between 111g/km and 160g/km must allocate the expenditure to the general plant and machinery pool – where they will be able to write down 18 % of the cost of vehicles against their taxable profits each year, on a reducing balance basis (previously 20%).

Companies purchasing cars with emissions of 161 g/km and above must allocate the expenditure to a ‘special rate’ plant and machinery pool – where they will be able to write down only 8 % of the cost of vehicles against their taxable profits each year, on a reducing balance basis (previously 10%).

Cars already on-fleet prior to the April 2009 change to an emissions-based structure will continue to be administered under the previous price based system until disposal under transition period rules.

The reductions in capital allowance rates were first announced by the coalition Government’s 2010 Budget Statement.

However, the Chancellor has also announced further changes in capital allowances business car rules, which will become effective in 12 months time.

From April 2013, the Government will extend the 100% first year allowance for businesses purchasing low emissions cars for a further two years to March 31, 2015.

Simultaneously it will reduce the carbon dioxide emissions threshold below which cars are eligible for the first year allowance from 110 g/km to 95 g/km, and leased business cars will no longer be eligible for the first year allowance.

Additionally, the carbon dioxide emissions threshold for the main rate of capital allowances for business cars will reduce from 160 g/km to 130 g/km. The threshold above which the lease rental restriction applies will also reduce from 160 g/km to 130 g/km.

From Newspress