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Budget 2014: New car and fuel tax rates

Next Green Car's in-depth summary of Budget 2014 as it affects vehicle tax, fuel duty, BIK rates and other motoring taxes.

What the Chancellor, George Osborne, has confirmed and announced in today's Budget 2014:

Fuel Duty: petrol and diesel – The Chancellor confirmed the scrapping the 2p per litre increase that was due in September 2014, and that no further rise would take place until at least May 2015. To date, fuel duty has now been frozen for over four years, the longest duty freeze for over 20 years. Latest FED rates >>

Fuel Duty: Alternative fuels – the Government has previously given a commitment to maintain the fuel duty differentials (benefits) for compressed natural gas (CNG) and biomethane until March 2024. The benefit for liquefied petroleum gas (LPG) will reduce by 1p per litre in each year to 2024. Latest FED rates >>

Vehicle Excise Duty (VED or 'car tax') – From 1 April 2014, VED rates will increase in line with the Retail Prices Index (RPI). According the previous announcements, the Government has shelved its plans to reform to the structure of VED bands for cars and vans in this Parliament. Latest VED rates >>

Vehicle Excise Duty: Classic vehicle exemption –The government will introduce a rolling 40 year VED exemption for classic vehicles from 1 April 2014.

Vehicle Excise Duty: Other changes – From 1 October 2014, motorists will be able to pay their VED by direct debit annually, biannually or monthly, should they wish to do so. A 5% surcharge will apply to biannual and monthly payments. A paper tax disc will no longer be issued and required to be displayed on a vehicle windscreen. Read more >>

Company Car Tax: Conventional cars 2014-19 – From April 2014, all BIK rates up to the end of the 2016/17 financial year are as previously announced, including the removal of the diesel supplement. New rates for 2017-18 announced today signal an increase of 2% (on previous year) for cars emitting more than 75g gCO2/km, to a maximum of 37%, in both 2017-18 and 2018-19. Latest BIK rates >>

Company Car Tax: Ultra-low emission cars 2015-20 – From April 2015, two new BIK bands will be introduced at 0-50 gCO2/km and 51-75 g/km CO2. The appropriate percentage of the P11D price subject to tax for the 0-50 g/km CO2 band will be 5% in 2015-16, and 7% in 2016-17. The appropriate percentage subject to tax for the 51-75 gCO2/km band will be 9% in 2015-16 and 11% in 2016-17. Latest BIK rates >>

Beyond 2017: In 2017-18 there will be a 4% differential between the 0-50

and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands. In 2018-19 this differential will reduce to 3%. The differential will reduce further to 2% in 2019-20 in line with the Budget 2013 announcement. First analysis suggests that Chancellor giving an extra 1% BIK benefit (differential) for ULEVs from 2017-19.

Enhanced Capital Allowances (ECAs) – The 100% First Year Allowance (FYA) for businesses purchasing the lowest emissions vehicles has already been extended until 31 March 2018. Today the Chancellor also extended the ECA for zero emission goods vehicles to 31 March 2018, but to comply with EU state aid rules, the availability of the ECA will be limited to businesses that do not claim the government's Plug-in Van Grant. No news yet on whether rental companies will be able once again to claim 100% FYAs for electric vehicles, as called for in a strong campaign run by the BVRLA. Read more >>

Though not yet confirmed, it is expected that today's Budget will announce that from April 2015, the CO2 emissions threshold for ECAs will be reduced from 95 g/km to 75 g/km. The case for extending the full year allowance for cars beyond April 2018 will be reviewed at Budget 2016 alongside a review of the 130 g/km main rate threshold (18%).

Fuel Benefit Charge (FBC) 2013-14 – From 6 April 2014 the FBC multiplier will increase by Retail Prices Index (RPI) for both cars and vans. Today's Budget confirms a similar RPI increase will also apply from 6 April 2015.

Van Benefit Charge (VBC) 2013-14 – From 6 April 2015 the main VBC rate will increase by RPI. Although unexpected, the government will extend VBC support for zero emission vans to 5 April 2020 on a tapered basis (it was due to expire this year). In 2015-16 the VBC rate paid by zero emission vans will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20, with the rates equalised in 2020-21. The government will review VBC support for zero emission vans in light of market developments at Budget 2016.

Value Added Tax (VAT): Adapted motor vehicles for wheelchair users – The government will consult on reform of the VAT zero rate relief on the supply of motor vehicles adapted for the use of wheelchair users, to seek to better target the relief and reduce fraud, and to ensure that users of lower limb prosthetics can benefit from the relief.

For the current car and fuel tax costs, go to: Car tax and fuel duty >>

For the latest company car tax rates, go to: Company car tax rates >>

Category: Taxes

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