Budget fuels economy with cut in excise duty

Mycompanyfleet's summary of how the 2011 Budget affects fleets

Budget fuels economy with cut in excise duty

Motoring costs for businesses throughout the country should fall as a result of fuel duty changes announced in the Budget. Chancellor George Osborne said  that ‘the Budget has put fuel into the British economy’ and announced a 1p per litre cut in fuel duty in response to a recent surge in global oil prices, effective from 6.00pm on Budget day.

He also said he would cancel a fuel duty escalator that would have pushed fuel costs higher. An inflation-linked rise in the fuel duty planned for next week which could have added 4p to the price of a litre of fuel was delayed until next year.

"The fuel duty escalator, that adds an extra penny on top of inflation every year, will be cancelled not just for this year, or next year, but for the rest of this Parliament," the Chancellor told the House of Commons.

Under the old system the fuel duty would have risen by the rate of inflation, plus 1p per litre.  Instead, the fuel duty will fall by 1p per litre.

"We will delay the inflation rise in duty planned for next week until next year - and also delay the April 2012 inflation rise until the following summer," Mr Osborne said.

Motoring organisations were quick to praise the initiative.

RAC Foundation director, Professor Stephen Glaister, welcomed the changes and said: "Thirty four million drivers will welcome this, as will haulage companies."

John Lewis, chief executive of the British Vehicle Rental and Leasing Association, commented:
“Whether you are a haulier, a fleet manager, a commuter or a just someone trying to keep your family car on the road, this imaginative tax measure will have an instant impact on your weekly cash flow. For many it will be more important than all the other tax announcements put together.”

Amongst other measures, the Chancellor announced that the business mileage reimbursement rate for people using their own cars on company business would increase from 40p to 45p for the first 10,000 miles and 25p per mile thereafter, reflecting the recent price rises at the pumps.

He also announced that to encourage businesses to use ultra low carbon cars, the Government will freeze company car tax for cars emitting less than 95g/km from April 2013. From the same date, the appropriate percentages for all vehicles with carbon dioxide emissions between 95g and 220g per kilometre will be increased by 1%.

In other measures, Vehicle Excise Duty will go up from April by the rate of inflation, except for commercial vehicles over 3.5 tonnes which will see a freeze on their rates this year.

At the same time, the fuel benefit charge multiplier used to calculate the tax payable on free fuel for company cars will increase by the rate of inflation, from £18,000 to £18,800.

And the van fuel benefit charge of £550 and the van benefit charge of £3,000 will both be frozen for 2011-2012.

To try and ensure companies improve profitability and therefore sustainability, the Chancellor also announced larger than expected cuts to the rate of Corporation Tax. 

Corporation tax is to be cut by 2% from 28% to 26% in April, not 1% as previously planned. The tax is then to be cut by 1% in each of the next three years, reducing it to 23% by 2014.
 

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