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This week, the motoring industry reacts to Chancellor George Osborne’s latest summer budget announced on Wednesday, but what exactly does the budget mean for the future of motorists? Trusted Dealers summarises the key points below.
Insurance Premium Tax
George Osborne announced an overhaul of road tax regulations, saying the current system “isn’t sustainable and isn’t fair”. As a consequence, Insurance Premium Tax will rise from 6% to 9.5% effective from this November, meaning every driver will pay more for their car insurance, with younger drivers between the ages of 17 and 22 potentially paying around £40 extra.
Fuel Duty remains frozen for the remainder of the year. Chief Executive of the Road Haulage Association, Richard Burnett, said: “The freeze on fuel duty continues the very positive policy of the last government and will give a massive boost to business confidence not only in the road haulage industry but the economy as a whole”
Vehicle Excise Duty (VED)
Motorists who drive expensive cars worth over £40,000 will be hit by an additional “premium” VED surcharge of £310 a year ( £450 in total) for the first 5 years, to fund a major roads building programme.
Motorists who drive some of the most environmentally friendly cars will also see their road tax increase. At present, cars are placed in one of 13 bands, with the cleanest petrol cars attracting no VED at all. However, under new changes announced, the 13 existing bands will be replaced by just three VED bands for all new cars sold after April 2017.
All petrol cars will be subject to a “standard” flat rate VED charge of £140 which the Treasury said would cover 95% of all cars sold in the UK. There will be no change for existing cars, to ensure that, “no one will pay more in tax than they do today for the car they already own.” Electric cars will continue to pay no car tax.
The changes will raise over £3billion in the three years after the changes are introduced which Osbone declared will be ring-fenced towards the new roads fund to pay for “sustained investment our roads so badly need”. However, this will only come in to effect from 2020-2021.
Reactions to the Budget
Sue Robinson, Director of the National Franchised Dealer Association (NFDA), said; “The changes to corporation tax and the review of vehicle excise duty which we have widely supported are positive announcements.”
Motoring organisations have said the changes will, “penalise all those cars which are currently in the low rate bands”.
Paul Watters, the AA’s head of roads and transport policy, said: “At the moment the very lowest CO2 emitting cars pay nothing; under the scheme a car that even emits one gram of CO2 will pay the same as a car emitting 255g of CO2.
“It is going to damage the sales of cars in the smallest banding groups which have been incredibly popular. The incentivisation that currently works has been turned on its head. It is a bit perverse.”
The Chancellor defended the changes, saying the new flat rate £140 VED charge was “less than the average £166 that motorists pay today”. He added that the changes were necessary because so many new cars now fell into low carbon emission bands that “by 2017 over three quarters of new cars will pay no VED at all”.
What are your thoughts on George Osborne’s latest summer Budget? Why not tell us below.