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Budget Statement: Spring 2021

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Budget Statement: Spring 2021 Budget Statement: Spring 2021 In a Budget dominated by the Government’s responses to the COVID-19 pandemic, the Chancellor Rishi Sunak made small changes to company car taxation, in addition to the measures announced at Budget 2020. Budget changes come into effect in April, and mean 100% electric cars with zero tailpipe emissions will cease to be exempt from BIK tax and become eligible at 1%. This rate rises to 2% in 2022-23 but remains at that level until April 5th 2025, making a strong case for company car drivers to select a zero-emission model prior to the UK ban on sales of all new petrol and diesel cars (except for some hybrids) in 2030. Elsewhere, a RPI-linked rise in Vehicle Excise Duty for cars and vans sees only a modest increase in annual liabilities for 2021-22, with zero-emission cars and vans remaining exempt. A CPI-related increase in the Vehicle Benefit Charges for employer-provided ‘free’ fuel and BIK tax for company-owned vans used for private mileage, as well as a rise in VED for vans, joined a freeze on petrol and diesel duty for the 11th consecutive year. Full explanations and guidance to the new BIK tax system are covered in this Ford Fleet Budget Guide, together with details of the other main announcements from the Spring 2021 Budget Statement. 1 In detail: Spring 2021 Budget Fuel: how diesel and Plug-in Hybrid compare The table below shows how fuel choice affects the BIK tax payable by drivers in 2021-22, depending on whether they select a diesel or Plug-in Hybrid company car. The figures show that choosing the Kuga Plug-in Hybrid will benefit drivers with a much lower BIK tax band and liability than for diesel in 2021-22. Ford Kuga ST-Line Edition Ford Kuga ST-Line Edition 1.5 EcoBlue 120PS 2.5 Duratec 225PS 5dr auto FWD (diesel)1 PHEV 5dr auto (petrol)3 P11D price £31,830 £36,500 CO2 emissions (WLTP) (g/km) 138 32 Combined mpg (WLTP) (mpg/l/100km) 51.4 – 54.3 (5.5 – 5.2) 201.8 (1.4) BIK tax band 2021-22 31% 11% BIK tax/month 2021-222 £164.46/£328.91 £66.92/£133.83 Annual BIK tax in 2021-222 £1,973.46/£3,946.92 £803.00/£1,606.00 1 RDE2-compliant. 2 For 20%/40% tax payers in 2021-22. 3 The Kuga ST-Line PHEV has a WLTP zero-emission range of 35 miles Summary: Diesel Diesel represents the fuel type of choice when the lowest cost of operation is important and the fleet operates high mileages. Plug-in Hybrid Plug-in hybrid represents the fuel type of choice when the lowest CO2 and BIK are important and the fleet operators are mindful of ‘green’ credentials with higher levels of urban operation. 2 In detail: Spring 2021 Budget Vehicle Excise Duty Budget 2020 announced a Call for Evidence on Vehicle Excise Duty, with a response closing date of September 3rd 2020. Results of the CfE have yet to be published, but are indicated to consider various measures to reform VED to encourage take up of lower-emitting vehicles. VED rates for cars registered on or after April 1st 2017 are set out in the table below. New diesel cars that do not meet the Real Driving Emissions Step 2 (RDE2) standard are subject to increased first-year rates. Zero-emission vehicles with a list price exceeding £40,000 are also exempt from VED until March 31st 2025. First-year rate Applicable to all cars registered on or after April 1st 2018 Standard rate (yr2 onwards) £155 – cars with CO2 emissions of 1g/km or over with a list price of £40,000 or less Additional rate (yr2 onwards) £490 – cars with CO2 emissions of 1g/km or over with a list price over £40,000. Cars with a list price over £40,000 and zero CO2 emissions are exempt from the additional rate until March 31st 2025. Vehicle Excise Duty: rates for new cars registered on or after April 1st 2017 2021-22 CO2 First year rate First year rate Standard rate Additional rate emissions (compared for diesel vehicles1 (Yr2 on for (Yr2 on for (g/km) with (compared with cars with list price cars with list price 2020-21) 2020-21) of £40,000 or less) of over £40,0002) 0 £0 £0 £0 £0 1-50 £10 (+£0) £25 (+£0) £155 (+£5) £490 (+£15) 51-75 £25 (+£0) £115 (+£5) £155 (+£5) £490 (+£15) 76-90 £115 (+£0) £140 (+£5) £155 (+£5) £490 (+£15) 91-100 £140 (+£5) £160 (+£5) £155 (+£5) £490 (+£15) 101-110 £160 (+£5) £180 (+£5) £155 (+£5) £490 (+£15) 111-130 £180 (+£5) £220 (+£5) £155 (+£5) £490 (+£15) 131-150 £220 (+£5) £555 (+£15) £155 (+£5) £490 (+£15) 151-170 £555 (+£15) £895 (+£25) £155 (+£5) £490 (+£15) 171-190 £895 (+£25) £1,335 (+£30) £155 (+£5) £490 (+£15) 191-225 £1,335 (+£30) £1,895 (+£45) £155 (+£5) £490 (+£15) 226-255 £1,895 (+£45) £2,245 (+£70) £155 (+£5) £490 (+£15) Over 255 £2,245 (+£70) £2,245 (+£70) £155 (+£5) £490 (+£15) 1 Applies to diesels that do not meet the real driving emission step 2 (RDE2) standard. 2 Cars with a list price over £40,000, except those with zero emissions, pay an additional rate of £335 per year on top of the standard rate for five years. Alternative fuel cars, including hybrids, bioethanol and LPG, pay £150 a year. New rates apply from April 1st 2021 Vehicle Excise Duty: rates for cars registered on or after March 1st 2001 2021-22 rates are shown below. VED CO2 2021-22 band emissions Standard rate (g/km) (compared with 2020-21) A Up to 100 £0 (+£0) B 101-110 £20 (+£0) C 111-120 £30 (+£0) D 121-130 £130 (+£0) E 131-140 £155 (+£5) F 141-150 £170 (+£5) G 151-165 £210 (+£5) H 166-175 £250 (+£10) I 176-185 £275 (+£10) J 186-200 £315 (+£10) K1 201-225 £340 (+£10) L 226-255 £585 (+£20) M Over 255 £600 (+£20) 1 Includes cars emitting over 225g/km registered before March 23rd 2006. 2021-22 rates apply from April 1st 2021 3 In detail: Spring 2021 Budget Company Car Tax WLTP-based company car tax system Company car Benefit-in-Kind (BIK) tax is based on a car’s P11D value and emissions of CO2. For cars with zero tailpipe emissions of CO2 the BIK tax rate for 2021-22 is set at 1% of P11D value. Cars registered before April 6th 2020 are taxed according to NEDC rules, with their rates frozen until the end of the 2022-23 tax year. New car registrations have a WLTP-derived CO2 figure recorded. For cars withCO 2 emissions of 1-50g/km, the number of miles they can cover with zero emissions has a significant bearing on tax liabilities (see the table below). The two tiers align in April 2022 and the rates are then held until March 31st 2025. A further emissions test – Real Driving Emissions (RDE) – introduced as the first on-road test element for vehicle homologations, is designed to prove emission control systems are as effective in use as they are under laboratory conditions. The RDE Stage 1 compliance became part of the UK car tax system in 2018, phased in alongside WLTP, while RDE Stage 2 (RDE2) compliance became mandatory from January 1st 2021. Currently, for diesel cars that do not meet the RDE2 standard, a 4% BIK tax charge applies, with the relevant percentages for these vehicles shown in brackets in the table below. BIK tax percentages 2021-2022 2021-2022 2022-2025 CO2 Zero BIK % BIK % BIK % emissions emissions (NEDC1) (WLTP2) (All)3 (g/km) range (miles) 0 All 1 1 2 1-50 >130 2 1 2 1-50 70-129 5 4 5 1-50 40-69 8 7 8 1-50 30-39 12 11 12 1-50 <30 14 (18) 13 (17) 14 (18) 51-54 - 15 (19) 14 (18) 15 (19) 55-59 - 16 (20) 15 (19) 16 (20) 60-64 - 17 (21) 16 (20) 17 (21) 65-69 - 18 (22) 17 (21) 18 (22) 70-74 - 19 (23) 18 (22) 19 (23) 75-79 - 20 (24) 19 (23) 20 (24) 80-84 - 21 (25) 20 (24) 21 (25) 85-89 - 22 (26) 21 (25) 22 (26) 90-94 - 23 (27) 22 (26) 23 (27) 95-99 - 24 (28) 23 (27) 24 (28) 100-104 - 25 (29) 24 (28) 25 (29) 105-109 - 26 (30) 25 (29) 26 (30) 110-114 - 27 (31) 26 (30) 27 (31) 115-119 - 28 (32) 27 (31) 28 (32) 120-124 - 29 (33) 28 (32) 29 (33) 125-129 - 30 (34) 29 (33) 30 (34) 130-134 - 31 (35) 30 (34) 31 (35) 135-139 - 32 (36) 31 (35) 32 (36) 140-144 - 33 (37) 32 (36) 33 (37) 145-149 - 34 (37) 33 (37) 34 (37) 150-154 - 35 (37) 34 (37) 35 (37) 155-159 - 36 (37) 35 (37) 36 (37) 160-164 - 37 (37) 36 (37) 37 (37) 165+ - 37 (37) 37 (37) 37 (37) 1 2 Source: HMRC. Cars registered before April 6th 2020, which use NEDC CO2 figures. Cars registered on or after April 6th 2020, which use WLTP CO2 figures. Figures in brackets relate to non-hybrid diesels which are not certified as RDE2-compliant. 3 Rates held at this level until March 31st 2025 4 In detail: Spring 2021 Budget Calculating company car tax The calculation of company car tax is based on the car’s P11D price and CO2 emissions, its zero emissions range and whether or not it is a diesel.
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