Chancellor freezes fuel duty in 2018 budget speech

The headline news from chancellor Phillip Hammond’s latest budget is that Stamp duty is to be abolished immediately for first-time buyers purchasing properties worth up to £300,000. Those first-time buyers purchasing properties over this amount won’t pay stamp duty on the first £300,000. However, there was less to say with regards to the automotive industry and business in general.

Nevertheless, the fuel duty rise for petrol and diesel cars scheduled for April 2018 has been scrapped. At the same time car tax for new diesel cars not meeting latest standards is to rise by one band next year. The good news for businesses reliant on deliveries is that this particular tax hike will not apply to van owners.

However, the existing diesel supplement in company car tax is to rise by 1 per cent. This combined with other signals suggesting motorists are moving away from diesel means the shape of the UK car parc is changing once again.

According to the treasury, proceeds from the 1 per cent diesel supplement rise will go to fund a new £220 million clean air fund.

Meanwhile, more than twice this figure (£540 million) will now go towards supporting the growth of electric cars, including more charging points.

And finally, the VAT threshold for small business is to remain at £85,000 for two years.

EV budget misses chance to address battery costs

While the budget included transport-focused adjustments such as the fuel duty freeze and electric vehicle (EV) charting infrastructure investments, it missed the chance to address the cost of the batteries EVs are so reliant on. Justin Benson, head of automotive at KPMG, commented:

“With the tax on diesel cars and some of the Chancellor’s proposals on electric vehicles (EV), the Government clearly wants to encourage consumers to buy more environmentally friendly vehicles. However, while EV grants go some way to making it easier to sell electric vehicles, the elephant in the room is the cost of batteries: this remains the largest single cost of new EVs. It would therefore be good to see more help for low emission technologies, such as enhancing R&D tax credits for battery and hydrogen delivery technology.

“From April 2018 any cars that don’t meet EURO6 standards will be subject to the higher tax bands, so most cars made pre-2015 will be affected. Recent reports confirm that new and used diesel cars have been reducing in price. Although this change may encourage some consumers to purchase new lower emission cars, it will mean further downward pressure on new and used diesel car prices, thereby reducing future investment in an industry already suffering from significantly reduced levels of investment due to uncertainty over Brexit.”

At the same time National Franchised Dealer Association representative (NFDA), Sue Robinson, highlighted the effect of the budget on vehicle sales: “The higher tax on first registration of all diesel cars which are not certified by the Real Driving Emissions will disproportionately affect many motorists who will be looking to purchase the most efficient vehicle to suit their driving habits. In many cases, Euro 6 diesel cars still represent the most efficient and affordable vehicle.”

Referring to the fuel duty freeze, Robinson continued: “It is positive and highly beneficial for motorists and consequently the whole retail automotive industry that the rise in fuel duty for petrol and diesel was cancelled. We are pleased to see that the Treasury took our recommendations into consideration as we had explicitly asked for the fuel duty freeze ahead of the Budget.”

And finally the Petrol Retailers Association signalled that petrol stations and the association may be in need of a name-change in future: “We welcome the chancellors announcement of a new £400 million Charging Investment Infrastructure Fund which is good news for fuel retailers and motorway service areas (MSAs) – provided they are included in the list of eligible businesses”, Brian Madderson, chairman of the Petrol Retailers Association (PRA) commented.

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