Examining the impact of the Autumn Budget 2018

The 2018 Autumn Budget was announced by Chancellor Phillip Hammond on the 26th October 2018

Tags: Automotive ECOS Taxation

The 2018 Autumn Budget, announced by Chancellor Phillip Hammond on the 26th October 2018 offered very little on employer sponsored car provision but the Government did suggest in the Budget paper that they will review the impact of WLTP on Vehicle Excise Duty (VED) and Company Car Tax (CCT) with a report to follow in Spring 2019. As a result, many businesses now face a further period of uncertainty, as Benefit in Kind (BiK) rates beyond April 2021 continue to be withheld until after the review.

Employee Car Ownership Schemes (ECOS)

The Chancellor’s Autumn Budget did not contain any measures relating to ECOS either directly or indirectly and your CBS car scheme is not impacted by any of the Chancellor’s announcements.

One of the major benefits to using Employee Car Ownership Schemes (ECOS) is that they can protect businesses and their employees from increases in company car tax and Class 1A National Insurance, generating significant financial savings while also removing the associated uncertainty and restrictions, allowing employers to regain control and determine the level of benefit they provide.

For more information, read our blog on managing your employee car benefit.

Company Car Tax

Company car drivers and businesses had called upon the Government to mitigate the increase in the cost of providing and driving a company car following the switch to WLTP testing.

On average CO₂ figures have increased by between 10% – 20% as a result of the new testing method, which equates to two tax bands, with some cars increasing by as many as four tax bands. The inflated company car tax and National Insurance costs as a result of WLTP are compounded further by scheduled increases to those tax bands in April 2019 and April 2020.

Representative example:

The Budget also failed to mention the diesel supplement, contributing to further uncertainty for company car drivers and employers alike. The supplement will continue at four BiK percentage points for diesel cars that do not meet Real Driving Emissions Step 2 (RDE2) standards. There are currently no vehicles in the UK that meet the standard and it is not mandatory for manufacturers to RDE test new cars until September 2019.

Fuel Benefit Charge

A Director or employee who is provided with a company car and receives free fuel from their employer is taxed on the cash equivalent of the benefit each tax year through the Fuel Benefit Charge.

It was announced in the Budget that from 6 April 2019, fuel benefit charges will increase in line with the Retail Price Index (RPI). The current fixed charge for 2018/19 is £23,400. Using the forecasted RPI for Q2 2019 of 2.7% this will increase by £600 to £24,000.

Fuel benefit charge x Vehicle BiK % x Marginal rate of tax = Annual fuel benefit tax

Representative example:

£24,000 x 33% x 40% = £3,168 or £264pm

*Premium mid-range Saloon – 2.0L diesel (Post WLTP CO₂ 145g/km)

Vehicle Excise Duty (VED) Rates

Existing Vehicle Excise Duty (VED) rates for new cars are set out in the table below. The first year rate of VED will be calculated as if cars were in the band above for all new diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard.

From 1 April 2019 VED rates for cars, vans and motorcycles will increase in line with RPI.

 

CO2

(g/km)

Registered Post-April 2018
First Year VEDSecond Year VED Onwards
Diesel cars meeting RDE2 standard and petrol carsDiesel cars not meeting RDE2 standardAlternative Fuel Cars

i.e hybrids

Standard Rate*
0£0£0£0£0
1-50£10£25£0£140
51 – 75£25£105£15£140
76 – 90£105£125£95£140
91 – 100£125£145£115£140
101 – 110£145£165£135£140
111 – 130£165£205£155£140
131 – 150£205£515£195£140
151 – 170£515£830£505£140
171 – 190£830£1,240£820£140
191 – 225£1,240£1,760£1,230£140
226 – 255£1,760£2,070£1,750£140
Over 225£2,070£2,070£2,060£140

*Cars with a ‘list price’ over £40,000 are subject to a £310 supplement on top of the standard rate of VED from the second year for a period of 5 years. The Standard Rate applies thereafter. Alternative fuel cars qualify for a £10 reduction in the Standard rate of VED from the 2nd year onwards.

CBS can design a bespoke scheme that delivers cost efficient savings to your business. Speak to Car Benefit Solutions today to discuss how we can make Employee Car Ownership work for your business.

 

 

 

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