Diesel cars are in for a battering after the Budget.
New diesel cars that do not meet latest emissions standards will face a one-off tax increase each April which will last until 2021 when most are expected to be replaced with the latest technology.
Affected models will be those which fail Real Driving Emissions Step 2 standards on emissions and that means most new diesels would be subject to the rise.
Chancellor Philip Hammond said the tax change would apply only to cars, and “white van man” was unaffected.
The tax rise will be levied according to a car’s CO2 emissions band.
The BBC suggested a Ford Fiesta or Vauxhall Astra would see a one-off £20 rise and a Land Rover Discovery a £400 increase while cars such as a Porsche Cayenne, would be hit with a £500 tax.
The April deadline could dramatically lift sales over coming months when the industry expects a downturn, but it’s not happy with the move. Canny buyers might leave it until the last minute and put pressure on dealers to cut prices or be stuck with the higher polluting models.
The chancellor said, “Drivers buying a new car will be able to avoid this charge as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see.”
He is keen to promote electric car sales but there are infrastructure issues to overcome and he’s allocated funding to boost charging points as well as ev sales.
The chancellor unveiled a £220m Clean Air Fund, and £400m – split equally between the Treasury and motor industry – to improve the charging infrastructure for electric vehicles.
There will also be another £100m in subsidies to help persuade consumers to buy electric vehicles.
Mike Hawes, SMMT Chief Executive responded to today’s Autumn Budget and said it had positive and negative measures for the motor industry.
The Autumn Budget contains some positive measures and we are pleased to see a renewed commitment to new and future vehicle technology. The investment in charge points and new incentives to encourage the take up of electric cars is a positive step to boost buyer confidence, which will be essential to increasing market share. However it’s disappointing that there is no additional funding for the incentivisation of plug-in hybrids, he said.
UK Automotive has established itself as one of the biggest investors in research and development so the announcement of further fresh incentives along with an increase in R&D tax credit will give an additional boost to innovation.
“Our greatest concern is the continuing mixed messages around diesel which will only deter and confuse the public further,” he said. “Diesel buyers will not face any additional taxation for the next six months, but thereafter, will face additional charges which will undermine fleet renewal efforts, which are the best and quickest way to address air quality concerns.
“Manufacturers are investing heavily in the latest low emission technology, however, it’s unrealistic to think that we can fast-track the introduction of the next generation of clean diesel technology which takes years to develop, in just four months. This budget will also do nothing to remove the oldest, most polluting vehicles from our roads in the coming years.”
Other Budget reaction:
FTA disappointed at missed opportunity to help businesses.
The Chancellor’s decision to freeze the rate of duty on fuel is welcomed by the logistics sector, which is already battling inflation at a five year high, but a cut would have done far more to boost the economy, says the Freight Transport Association (FTA).
FTA, the UK’s largest membership association for the whole logistics sector, has been campaigning for a 3p cut in fuel duty, to provide a significant and immediate positive impact on the nation’s economy. Christopher Snelling, FTA’s Head of National Policy,said the freight industry is disappointed by today’s Budget announcement: he believes the Chancellor could have gone far further to assist the sector which supports all other businesses across the UK.
Government U-turn on diesel cars tax bill…
Commenting on some of the specific measures announced in Chancellor Phillip Hammond’s speech, BVRLA Chief Executive Gerry Keaney commented that to temporarily increase the Company Car Tax Diesel Supplement to 4% for vehicles that don’t meet the Real Driving Emissions Step 2 standard is a U-turn on policy.
“Having previously promised that it was only looking to change the tax treatment for new diesel cars, the Government has gone back on its word by retrospectively raising the company car tax bill of hundreds of thousands of workers.
“People that chose a diesel car as a cost-efficient, low CO2 form of essential business travel are being punished unfairly. Why should drivers at work be treated differently from other taxpayers?
“We are also disappointed that the Government has not given any further clarity on Company Car Tax rates beyond the 2020 tax year. This information is vital as BVRLA members work with their customers in putting drivers into the most affordable, safest low-emission vehicles.
“This is a fair, well-signposted tax change that will encourage more drivers and fleets to look at alternative hybrid and petrol-powered new cars.
“Fleets across the UK will be breathing a sigh of relief that the Chancellor has not increased the tax burden on commercial vehicle operators. This is the fair thing to do as they have no realistic alternative to using a diesel van or truck.
“We welcome the Government’s review into the fuel duty treatment of alternative fuels and the announcement of a freeze of the fuel duty escalator for LPG.”
On the confirmation that NEDC-compatible CO2 figures would continue to be used in calculating Company Car Tax until April 2020
“We welcome this final confirmation that a new WLTP-based CO2 Company Car Tax regime will be introduced in 2020. Although we had pushed for the vehicle leasing industry to be given an extra year to prepare for these changes, we look forward to working with the Government in developing a tax revenue neutral approach for 2021 and beyond.”
cap hpi Budget 2017 response
James Dower, senior editor of Black Book at cap hpi, said, “This is a forward looking Budget that shows the Government clearly recognises the need to invest in hybrid and EVs and is prepared to invest substantially.
“We welcome the £400m investment in EV to improve the national charging infrastructure but whether this will be delivered quickly enough to convince consumers to make the switch from petrol and diesel sooner remains a big question.
“Both diesel and petrol vehicle owners have not been hit where it hurts following the cancelling of fuel duty rises which is also good news. It is encouraging that operators of commercial vehicles which are predominantly diesel have not been adversely affected by this Budget. Details on how the new £220m clean air fund is to be utilised remain to be detailed.”
Andrew Mee, senior forecasting editor UK at cap hpi, added, “The changes to VED announced for April 2018 will have little impact on widespread diesel values and new car registrations.
“The changes to VED will typically equate to increases of around £20 for the first year and will have very little impact on diesel registrations and values. The additional 1% diesel supplement on BIK will further encourage company car drivers to switch from diesel but the resulting fall in registrations will help to support used diesel values in the future.
“This is a Budget which reinforces some of what we have previously predicted. We still anticipate new car registrations in 2018 to follow the ongoing pattern of recent years and shift away from diesel into petrol and AFVs. We’ll also see used diesel values deflate year-on-year slightly more than petrol values. There are marked variations according to vehicle sector and this deflation is most prominent in the small vehicle sector whereas, the impact will be less pronounced in larger car sectors where diesel is strongest.”