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Budget 2012: what it means for motorists

  • What the Budget means for car buyers
  • Petrol to average 155pl by summer 2012
  • 3% company car tax diesel supplement scrapped in 2016
Words ByEmma Butcher

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George Osborne's 2012 Budget has little to warm the hearts of Britains car owners. If you drive your own car, or run a company vehicle, your running costs will go up.

Fuel duty
Motorists will feel the biggest impact on their pockets when they fill up this summer, after the Chancellor announced that the planned three pence per litre fuel tax rise will go ahead on August 1, 2012.

With VAT at 20%, this will result in a four pence per litre (ppl) rise in pump prices, without adding in any continuing increase in global oil prices.

The increase will result in pump prices for petrol increasing to as much as 155ppl in the summer.

The announcement has sparked outrage among motoring groups, with the Retail Motor Industry Federations Petrol division calling it irresponsible and the British Vehicle Rental and Leasing Association labelling it cynical.

Vehicle Excise Duty (road tax)
Continuing the misery for motorists, the Chancellor announced that from April 2012, road tax rates will increase, but he softened the blow by saying this would be in line with inflation. Cars in band D and above are affected.

The Government also wants to reform the VED regime to reflect continuing improvements in fuel efficiency. A direct debit system is to be considered, to allow car buyers to spread road tax payments suggesting that future increases could be significant.

Company car tax
Company car owners will pay more from 2015, when the company car tax percentage multiplier increases by 1% for cars emitting more than 75g/km of CO2 to a maximum of 35%, and by 2% to a maximum of 37% in 2015-16 and 2016-17.

The company car tax rates for 2012 have already been set and will come into effect in April.

See also: Company car tax band changes explained

Electric cars wont save you from the taxman for long, either: from 2015, drivers of zero-emission cars will lose their exemption from company car tax, and will pay 13% of the vehicles list price, increasing to 15% in 2016-17.

Company car fleets are to be encouraged to be more fuel efficient, with the 100% first-year capital allowance for businesses buying low-emission cars extended for a further two years to March 31, 2015.

The CO2 emissions eligibility threshold will be reduced, however, from 100g/km to 95g/km. Leased business cars will no longer be eligible for the allowance.

In addition, from April 2013, the CO2 emissions threshold for the main rate of capital allowances for business cars will reduce from 160g/km to 130g/km. The threshold above which the lease rental restrictions apply will also reduce by the same amount.

Finally, from April 6, 2012, the Fuel Benefit Charge multiplier for cars will increase from 18,800 to 20,000 and will increase by 2% above the RPI in 2013-2014.

According to financial analysts at Deloitte, these increases will result in a leap in the Governments tax take of more than 600 million on company cars alone.

There is some good news, however: the 3% company car tax diesel supplement, which has long been considered unfair by buyers, will be removed from April 2016. This means diesel cars will be subject to the same level of tax as petrol counterparts.

Road tolls
The Chancellor reiterated his plans to use private investment and road tolls to fund improvements to the UKs road infrastructure.

See also More road tolls considered by PM

The introduction of road tolls is unlikely to go down well among motorists who are already facing steeper costs to help fund the public purse. According to car supermarket Motorpoint, 85% of its website visitors are opposed to the idea.

The proposed widening of the A14 between Huntingdon and Cambridge could be one of the first road improvements schemes to be part-funded by tolling. Further announcements are expected in July 2012.

In other Budget 2012 news
Expansion of London Heathrow Airport is looking more likely because the Chancellor announced that the Government will discuss plans to increase 'airport capacity' in the south this summer.

From April 2013, it will be harder to avoid paying VAT on vehicle imports, when the Government introduces a new system that will require vehicles to be notified to HMRC before registration with the DVLA.

New river crossings in East London could get extra momentum after the Government said it will explore how to streamline the planning process for proposed routes.

Cyclists will be given more priority on the capitals roads, thanks to a 15 million payment to Transport for London for investment in cycle safety, including improved provision for cyclists at junctions in the capital.

The Government wants to encourage more train travel in the north with support for a 130 million investment by Network Rail to improve links between Manchester and Sheffield, Rochdale, Halifax, Bradford, Bolton, Preston and Blackpool.

Emma Butcher