29 March 2021
Chancellor Rishi Sunak’s March Budget concentrated on Covid-19 recovery, and at first glance there was not a lot of fleet-specific interest.
But behind the headlines were a number of key announcements that impact businesses running cars, vans and trucks.
Freezing Fuel Duty
Sunak announced the Government will freeze Vehicle Excise Duty for cars, vans and heavy goods vehicles for 2021-22 and will suspend the HGV Levy for another 12 months from August 2021.
It is the eleventh consecutive year duty has been frozen.
However, the Treasury says that future rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050, suggesting it may be the last time the rate will stay frozen.
Alex Veitch, General Manager of Public Policy at Logistics UK said: “As the economy starts to recover from the impact of the COVID-19 pandemic, Logistics UK and its member businesses are grateful for the news of a continued fuel duty freeze. At a time when many businesses are yet to open up fully, or to see the first signs of recovery, another charge to already fragile balance sheets could have been catastrophic.”
Commenting, RHA Chief Executive Richard Burnett said: “A fuel duty freeze for the 11th year in succession comes as very good news for the hundreds of thousands of commercial vehicle operators who have been struggling as a result of the pandemic.”
Fuel benefit and VED inflation rises
From April 6, fuel benefit charges and the van benefit charge will increase in line with the Consumer Price Index, while from April 1 VED rates will rise in line with the Retail Price Index inflation rate. As a result, VED for cars registered after April 2017 will increase to £155 per year.
Capital allowances change
Already announced last year but confirmed in the Budget: from April 2021, capital allowances on business cars will change. The 100% first-year allowance for zero emission cars will be continued until 2024/25.
Those qualifying for the main rate of 18% must have CO2 emissions of 50g/km or below, with those above that figure subject to a write-down allowance on a continuing balance basis.
Super deductions introduced
Electric vehicle charge points were listed among the assets eligible for the super-deduction (130% first-year relief) on capital allowances. The Government said this will “give companies a strong incentive to make additional investments, and to bring planned investments forward.”
The British Vehicle Rental and Leasing Association said it was pleased to see its introduction, adding: “The Chancellor has provided support and incentives where they are needed most.”
Corporation Tax rises
From 2023, Corporation Tax will increase from 19% to 25% for companies with profits of more than £50,000. For those with profits below this figure, the rate will remain at 19%.
The 19% rate remaining for businesses with profits up to £50k and tiered protections for businesses between £50k and £250k. The level of capital allowances on electric vehicles should make them more attractive in limiting Corporation Tax liability.
Responding to the announcement of a rise in Corporation Tax, Alex Veitch, General Manager of Public Policy at Logistics UK said: “Many logistics businesses are still to recover fully from the impact of COVID-19. It is vital that business is not penalised by additional taxation at this crucial time in the economic recovery, particularly as the logistics sector is the one which drives all other sectors, delivering the raw materials and finished goods needed to boost trade and competitiveness.”
No company car Benefit-in-Kind announcement
There was no further announcement on the future of company car Benefit-in-Kind (BIK) rates. The current tables run until 2024/25.
“We are disappointed that the Government has given no further indication of the longer-term motoring tax roadmap it will use to drive decarbonisation, but there is lots of consultation going on and we expect more news on this in the coming months,” said BVRLA Chief Executive, Gerry Keaney.
The Treasury did note there would be a consultation later in the year on tax policies but gave no indication if this would include BIK.
Infrastructure Bank launched
A new bank is to be launched with £12bn capitalisation from the Government, with the intention of channelling funds into infrastructure projects intended to combat climate change.
Sunak said he would task the Leeds-based bank with investing in sectors such as renewable energy, carbon capture, storage and transportation, and providing low-rate loans to local councils in order to fund projects as part of the UK's commitment to reach "net zero carbon" by 2050.
Other key points in the Budget included:
- Furlough scheme extended until the end of September
- Rates of income tax and National Insurance will not rise
- Creation of eight new freeports in England
- From next year, personal tax thresholds to be frozen until 2026
- A £5bn restart grant for businesses to help companies get going after lockdown
You can find all announcements and further details here.