Jeff’s take on the Autumn ‘22 budget
CHANCELLOR Jeremy Hunt’s Autumn Statement was delivered against the backdrop of continuing economic uncertainty. Designed to promote long-term stability while bringing down high rates of inflation, the Chancellor hopes his Autumn Statement will reduce the length and depth of the ongoing recession, a recession which has now been confirmed by both the Bank of England and the Office for Budget Responsibility.
Tax rises and spending cuts
With a fiscal ‘black hole’ of £55 billion, the Chancellor proposed spending cuts and tax rises in broadly equal measure, introducing new fiscal rules designed to curb, and over time reduce, government borrowing, which he hopes will prevent the Bank of England having to increase interest rates further.
Tax rises
Income tax and National Insurance thresholds were frozen until April 2028. The additional rate threshold of £150,000 was reduced to £125,140 effective April 2023.
As a result, millions of new taxpayers will be ‘created’ thanks to ‘fiscal drag’ and the number of higher rate taxpayers will more than double as the UK faces up to a record tax burden.
The Chancellor confirmed the pensions triple lock will stay, uplifting state benefits and credits in line with inflation, not earnings, and increasing the National Minimum Wage by 9%.
The Energy Price Guarantee and Energy Bill Relief Scheme were extended for a further year, to be paid for by additional windfall taxes, in the form of an increased Energy Profits Levy and a new Electricity Generator Levy, that will apply until 2028.
Recognising the significant inflationary pressures businesses are facing, there was a package of targeted support to help with business rates costs, with an extension of relief for retail, hospitality and leisure sectors, and additional support for small businesses.
Spending cuts
While protecting public services – health, social care and education – the Chancellor confirmed that total spending for public services will grow in real terms until 2025.
But government departments have been challenged to identify savings wherever possible, with the growth of planned day-to day spending to be curtailed in real terms and capital spending maintained in cash terms between 2025 and 2028, including spending on the government’s commitments to deliver major infrastructure projects.
What about the fleet industry?
It’s been confirmed that the van and fuel benefit charges will be increased in line with inflation. But the key announcements related to increased company car tax and the application of Vehicle Excise Duty to electric vehicles, as well as confirmation of the extension of first year allowances for electric charge points.
Company car tax
From April 2025, benefit in kind (BiK) rates for electric and ultra-low emission cars emitting less than 75g per kilometre will increase by 1% annually, up to a maximum of just 5% for electric cars and 22% for ultra-low emission cars in 2027/28.
Rates for all other bands will increase by 1% (up to a maximum of 37%) in 2025/26, and will then be frozen for the next two years.
“Today marks a key milestone in the UK’s transition to zero emission motoring and cements the momentum we have gathered in recent years. Our sector is the driving force behind getting cleaner, greener vehicles on UK roads, with the tax regime a critical lever in making it happen.
Gerry Keaney, BVRLA chief executive”
Vehicle Excise Duty
From April 2025 electric cars and vans will be subject to VED in the same way as petrol and diesel vehicles, but it appears that the expensive car supplement will only apply to electric cars registered from 01 April 2025, with zero emission cars registered before April 2025 continuing to be exempt.
What are the impacts on the fleet sector?
Given the industry’s current focus on salary sacrifice, the modest annual increase to BiK tax will be widely welcomed, tax savings available will be largely preserved and there’s little likelihood its popularity will wane. And the certainty offered from the confirmation of BiK tax rates until 2028 should drive even greater interest by employees and employers.
Although the withdrawal of the plug-in car grant has pushed up the cost of acquiring an electric car, the application of Vehicle Excise Duty from April 2025 will further increase their whole life costs, but the comparison between electric cars and internal combustion engine cars should not be materially changed.
And finally, those businesses that have, or are about to, switch to electric will welcome the extension of the first year allowance on charge point installation until April 2025.
This article was originally posted on Broker News, November 19th 2022. Click here to read the article and access there wide broker market news articles and features.
