How does the 2016 budget affect drivers?

The Chancellor of the Exchequer, George Osbourne has presented his 2016 Budget to Parliament. The Chancellor has encouraged a shift towards lower emission car and vans usage amongst other changes. Here are the main talking points for the motor industry:

Fuel Duty

Tax on both petrol and diesel fuel will be frozen in 2016 – despite calls from air quality campaigners to move away from these vehicles. Fuel and oil prices have noticeably fallen over the past year, and it had been suggested that the government use this time to raise vehicle excise duty on fuels to drive down air pollution emissions.

Low emission funding

The government’s Office for Low Emission Vehicles will provide £38 million in grants in 2016. This will be matched by the private sector and used towards research and development into low emission technology across the UK. The funding will be topped with £15 million also being added to support research into lowering vehicle emissions in the Midlands region.

Vans

The Van Benefit Charge (VBC) tax is set to increase with RPI. The government will extend VBC support for zero-emission vans, meaning that from April 6 2016 the charge will be 20% of the main rate in 2016/17 and 2017/18, then increasing on a tapered basis up to 2022.

The government will review the impact of this incentive at the 2018 Budget as well as enhanced capital allowances for zero-emission vans.

Company Cars

After committing in 2013 to reviewing incentives for ultralow emission vehicles, this year the government said it would continue to base Company Car Tax on the carbon dioxide (CO2) emissions of cars from 2020/2021.

Company Car Tax will increase by three percentage points for cars emitting more than 75g CO2/km to a maximum of 37% in 2019/20.

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