George Osborne has delivered the first Conservative budget since 1996, and there are some pivotal implications in the works for both car owners and road users.
Osborne began his general discussion of transport by explaining that four-fifths of all journeys in the UK are made by road, but in the last year, we’ve built just 300 miles of new motorway. This is something that he intends to rectify by establishing a new roads fund in 2017, with a view to improving the country’s transport infrastructure.
He also revealed that by 2017, most new cars will pay emissions-based vehicle excise duty (VED), which will on average amount to £140.
Therefore, as of 2017, this new VED tax will be enforced, though will only apply to cars in England. The tax will be levied across three bands: zero emissions, standard (which constitutes 95% of all cars) and premium. He assured that nobody would pay more in tax than they currently do for the car they already own.
Vehicle excise duty (VED) in detail
Discounts for greener cars will no longer apply for new and prestige cars (over £40,000) and larger vehicles such as SUVs will be charged an increased vehicle excise duty when new. The first year of ownership tax will still be linked to CO2 emissions.
From 2017 VED will be split into three bands:
- Zero emissions,
- Standard and
- Premium.
The majority of new cars, including those with low emissions, will pay the Standard rate of excise duty, except in the first year of ownership. Existing vehicles will not be affected by the changes in vehicle excise duty.
The increase in funds from VED will be dedicated to road improvements, which will be introduced in 2020.
‘every single penny raised in Vehicle Excise Duty in England will go into that fund to pay for sustained investment our roads so badly need.’
It has not been made clear what will happen with the funds raised in Scotland, Wales and Northern Ireland.
Fuel duty in detail
For 2015 fuel duty has been frozen. The government will receive less in duty from petrol pumps in 2015-16 (expected to be £27.1 billion) than they did in 2014-15, which was £27.2 billion.
Osborne has also confirmed that there will be no changes to the plans for fuel duty set out in March's Budget and that fuel duty will remain frozen for the remainder of the year. This is great news for long-distance commuters, those on a restricted budget and fleet owners.
MOT changes in detail
New cars and motorbikes will have an extended period before the first MOT, from three years up to four years after purchase.