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Budget 2012: fuel prices and car tax to rise

March 21, 2012

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