What Does The Autumn Budget 2024 Mean For Motorists?
The Autumn budget is just less than 2 weeks away and there has been a lot of speculation this time around about how it is going to affect motorists. With the automotive industry undergoing its biggest change in over a century in the run up to the 2030 combustion engine ban, the changes to how it will affect the UK’s drivers is likely to be more relevant than ever before.
Any legislation or tax adjustments brought in by the Government will affect the 50 million licence holders and their 40 million licenced vehicles differently across across Great Britain (data from gov.uk). So what does the Autumn Budget 2024 mean for motorists? Here are the expected key points and how they could affect those they apply to:
Electric Vehicles Taxation
One of the biggest talking points is the likely introduction of taxation for electric cars. Up till now those that drive a fully electric vehicle have been exempt from paying car tax, incidentally one of the last remaining incentives to purchase an electric car, but this is likely to change from 2025.
It is thought that the rates will be lower than the current taxing of combustion engine vehicles however the potential decision to introduce taxation for electric cars may cause a further drop in demand for EV’s. With the volatility of energy prices, the expense of public charging points and the depreciation of EV’s, the fact that they were road tax exempt were one of the main buying points for potential customers.
With the change unlikely to come into effect until April 2025, now could be the perfect time to purchase an electric vehicle and benefit from the fact that it is currently road tax exempt.
Fuel Duty
Much of the discussion around the Autumn Budget has been around the potential changes to fuel duty. In 2022 the Government introduced a 5p per litre discount on fuel duty, a rate that had been frozen since 2011, in order to help with the cost of living crisis and ease the pressure on those relying on their vehicles to get around when costs were rising on everything. This will result in the fuel duty to return to 58p per litre.
Encouragement by the Government to get people to purchase electric vehicles means that the Treasury is losing out on ￡2billion a year through the decrease in fuel duty they are receiving. However, they also know that due to the increase in retailer margins over the past few years, motorists have been overcharged by ￡1.6billion according to the Competition and Market Authority’s recent report.
The hope is that the increase in fuel duty rates will cut the retailer margins and encourage them to return to pre-cost of living crisis levels, however whether they are merely passed on to motorists instead remains to be seen.
Vehicle Excise Duty (VED)
Road tax usually increases with inflation every year and it is expected that this will happen again starting from April 2025. With the expected introduction of car taxation for electric cars it may also be that less efficient and older cars may see larger increases than those that are more fuel efficient.
Not only that but it would also be the ideal time to adjust the car tax bands and how motorists are charged for each category. The introduction of EV charges would meant that the bands would have to be readjusted anyway so why not reassess the bands at the same time.
Since car taxation is mostly decided against the emissions levels of a vehicle, it would make sense that if EV’s are to be included, that they are in a lower band, then very efficient hybrids, with higher polluting vehicles being charged the most.
Road Pricing
One of the more surprising things to be discussed prior to the Autumn Budget has been the possibility of Road Pricing being introduced as an alternative way to tax road users and their vehicles. Whist this may be an unfair way to charge those who have no choice but to commute to their place of work over those who are able to work from home, it would help with the taxation of those using their vehicles more than others.
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It would also enable electric car owners to be taxed by the amount they are using their vehicles, meaning that using the taxation to fund road repairs and maintenance does become more relevant.
Whilst the Road Pricing introduction may not be introduced this time round due to its infancy, expect it to be considered for future Budget discussions for some time yet. As a way to tax people the more they use their vehicles, it does line up with the same strategy as the fuel duty taxation, being that the more you use your vehicle the more that you would be taxed.
Company Car Tax
Company Car Tax, or Benefit In Kind (BIK), is also expected to rise, especially since the likely introduction of taxation for electric vehicles. The current company car rates are weighted heavily in favour of electric cars over combustion vehicles. An EV is currently charged at just 2% BIK whereas a combustion engine vehicle that emits over 170g of CO2 per kilometre is as much as 37%.
This huge current benefit towards EV’s as a business purchase is shown by the fact that whilst EV sales over the past 12 months rose by 24.4%, private sales rose by just 3.6% (SMMT report). Whilst the much lower rate is expected to continue for EV’s it is likely that it will increase marginally as so many business users are currently taking advantage of the lower rates.
Electric Car VAT
The Society of Motor Manufacturers & Traders (SMMT) and bosses from 13 major car manufacturers have written to the Government to suggest that the VAT is reduced by as much as 50% on not only electric cars but also on public charging points. With manufacturers struggling to meet the 22% sales target for EV’s and 10% for van sales they say that something must be done to increase demand amongst motorists.
According to the SMMT, demand for electric vehicles in the year to date is down by 6.3% even with manufacturers offering preferential finance rates and considerable discounts on both new and used models. They suggest that unless something is done to incentivise motorists, the demand for EV’s will continue to fall as many will take some persuading to part with their combustion engine vehicles.
A VAT reduction of 50% on the purchase of new electric vehicles however, would be expected to cost the Government as much as ￡7.7billion by the end of 2026.
Public Transport
As with most budgets that are aimed at encouraging motorists to omit less CO2 and use their vehicles less, it is expected that public transport will also receive an increase in funding. This will include both the infrastructure, including bus routes, additional cycle lanes and improvements to the rail network, and additional funding for the purchasing of electric buses to replace existing combustion engine public transport.
This will help the Government with their commitment to reducing carbon emissions as well as promoting greener alternatives wherever possible. It will also look to help to reduce congestion and carbon emissions in inner city areas, whilst providing a quieter and more enjoyable environment for pedestrians at the same time.
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