Spring Budget 2017 – What it means for the Motor sector at a glance
The government recommitted to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament.
From April 2017 the personal allowance will rise to £11,500 (£11,000) and the higher rate threshold to £45,000 (£43,000).
The dividend allowance will be reduced from £5,000 to £2,000 from April 2018, to reduce the tax differential between the self-employed and employed, and those working through a company. Unfortunately this will particularly impact small businesses, family owned enterprises and entrepreneurs.
Private fuel BIK
As previously announced, there will be an increase in the scale charge to £22,600 (£22,200), being a 1.8% increase. As the appropriate percentages increase year on year, in reality, a car with a CO2 increase of 2% from last year to 25% of List Price will be subject to an increase of £544 (10.7%) and be taxed on £5,650.
Pre-announced reduction to 19% (lowest in G20) in April 2017 and further reductions to 17% by 2020.
Wholesale changes to VED/road fund licence for new cars comes in from April 2017, with all vehicles will paying a standard rate of £140 a year from Year 2 onwards, but with a new graduated rate in Year 1 based on CO2 levels. However, an additional rate will be added to the vehicle tax for all new vehicles with a list price of over £40,000. This additional rate of £310 will be payable each year for 5 years from the end of the first vehicle licence.
Zero emission vehicles will have a standard rate of £0 but if the list price is over £40,000 they will pay the additional rate of £310 a year for 5 years.
The government will continue to explore the appropriate tax treatment for diesel vehicles and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017.
The Budget takes the next steps in delivering the government’s Industrial Strategy by putting the UK at the forefront of global technological progress including through developing artificial intelligence and robotics, and batteries for the next generation of electric vehicles.
Insurance Premium Tax (IPT)
The government will legislate to introduce anti-forestalling provisions and increase the standard rate of IPT to 12% from 1 June 2017, as announced at Autumn Statement 2016.
As also announced in the Autumn Statement 2016, from April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. Pensions, pension’s advice, childcare, Cycle to Work and ultra-low emission cars will be exempt.
Ginni Cooper, Corporate Services Director said: “The changes in class 4 NIC rates and the cut in the dividend allowance have been the main talking point of this budget due to the resultant impact upon the owner-managed and small business community. The subsequent decision to abolish the hike in Class 4 NIC rates will be welcomed by our clients in the sector. Changes in VED and BIK rates will impact on car buyers decisions and businesses are encouraged to review their fuel policies as in many cases employees can end up paying more in tax than the actual cost of private fuel. Whilst diesel cars remained off the agenda in this budget statement, they look to be a focal point of the next one in the autumn.”
Thank you to our colleagues at MHA for their assistance in creating this blog post.