How will the Budget affect drivers?

How will the Budget affect drivers? 21st March 2014

Drivers and fleet owners are among those that are set to gain following this year's Budget. Among the changes unveiled on March 19th, chancellor George Osborne announced that the government would be freezing fuel duty and putting aside a £200 million fund to repair potholes.

Mr Osborne confirmed that the tax on petrol and diesel would not rise until Spring 2015, following on from his promise during the Autumn Statement of 2013 not to raise fuel duty in September 2014.

Some groups do not believe that the Budget went far enough. For example, the Freight Transport Association (FTA) welcomed the freeze in fuel duty but added that it was disappointed that the government had failed to implement its suggestion to decrease the tax by three pence per litre.

Speaking about the Budget, managing director of policy and communication at the FTA James Hookham said: “The chancellor has kept his promise to freeze fuel duty and industry will be £187 million a year better off for that, but he missed the opportunity to stimulate the economy further by reducing fuel duty and putting around £690 million into the pockets of families and British business. This could have given a further stimulus to the economy and locked in the positive growth already achieved.”

Additionally, the £200 million fund for pothole repairs could result in damage along routes affected by floodwater earlier in the year being fixed, lessening the potential damage to cars and commercial vehicles. To get a cut of the money, councils are asked to bid for the funds.

Yet the fund would only cover half of the cost of repairs as the current estimate sits at £400 million. That is in addition to the £10.5 million made up by the backlog of pothole repairs needed prior to the flooding.

Drivers of company cars that produce low emissions are also set to see a reduction in tax during the 2017/18 tax year and the 2018/19 tax year. Cars that come under the classification of having low emissions are those that produce less than 75 grams of CO2 per kilometre.

Chairman of the Association of Car Fleet Operators Damian James said of the news about the reduced tax: "It is a helpful move and means that employees choosing low emission vehicles will pay a lower rate of benefit-in-kind tax than previously envisaged. It is a positive incentive to choose a low emission company car."

However, those who drive company cars that produce higher emissions can expect to see an increase during the 2017/18 and 2018/19 tax years. This could result in their tax band rising by up to 37 per cent.

Where drivers will be worse off is as a result of the increase due to inflation of the vehicle excise duty (VED), which is set to change from April 2014 and will apply to cars, motorbikes and vans in the main. That is, unless they are drivers of classic cars; following last year's 1974 exemption, the government has brought in a rolling 40-year VED exemption rule.

Posted by Written by Danielle Barge