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Budget freezes fuel duty, extends company car BIK, capital allowances

Wed 16 March 2016 | Back to news list

The 2016 Budget contained some measures which will have an impact on UK low carbon transport. The Chancellor froze fuel duty for the sixth year in a row while announcing that the rates of car, van and motorcycle VED, Van Benefit Charge and van and car Fuel Benefit Charge are being raised in line with inflation. The Government will continue to support the uptake of zero and low emission vehicles through retaining the Van Benefit Charge for two more years and extending the first year allowance for business purchases of low emission cars for a further three years.
The 2016 Budget says that the government will:
  • extend the 100% first year allowance for businesses purchasing low emission cars for a further three years to April 2021. 
  • lower the main rate threshold for capital allowances for business cars to 110 grams of carbon dioxide (CO2) per kilometre and the first year allowance threshold to 50 grams of CO2 per kilometre from April 2018, to reflect falling emissions, and review the rates from April 2021 onwards at Budget 2019
  • Continue to base Company Car Tax on CO2 emissions of cars, and consult on reforming the lower CO2 bands for Ultra-Low Emission Vehicles (ULEVS) to refocus incentives on the cleanest cars beyond 2020-21. 
Following its consultation on simplification of the business energy efficiency tax landscape, government will abolish the Carbon Reduction Commitment (CRC) energy efficiency scheme with effect from the end of the 2018-19 compliance year. 
It will increase the main rates of Climate Change Levy (CCL) from 1 April 2019, to cover the cost of CRC abolition in a fiscally-neutral reform and incentivise energy efficiency in CCL-paying businesses. 
The Budget also announced plans to establish the UK as a global centre for excellence in connected and autonomous vehicles. The government says it will:
  • conduct trials of driverless cars on the strategic road network by 2017
  • consult this summer on sweeping away regulatory barriers within this Parliament to enable autonomous vehicles on England’s major roads
  • establish a £15 million ‘connected corridor’ from London to Dover to enable vehicles to communicate wirelessly with infrastructure and potentially other vehicles
  • carry out trials of truck platooning on the strategic road network

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