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Spring Budget 2024: key highlights for motorists
Find out how the Spring budget will affect cars and vehicle owners from April 2024 onwards.
Words by: Nimisha Jain
Last updated on 26 March 2024 | 0 min read
• VED will go up in line with the retail price index inflation from 1 April 2024 onwards
• Levy charges for lorry drivers will be frozen for another year • Fuel duty will remain frozen at 52.95 pence per litre for petrol and diesel • Leasing companies will be able to claim back full capital allowances on plant and machinery As part of the Spring Budget of March 2024, Chancellor Jeremy Hunt has announced a number of changes that will affect drivers and businesses – including an increase in vehicle excise duty, fuel duty freeze and 100% capital allowance on plant and machinery for leasing companies. Here’s how these changes may affect you from April 2024 onwards.
• Levy charges for lorry drivers will be frozen for another year • Fuel duty will remain frozen at 52.95 pence per litre for petrol and diesel • Leasing companies will be able to claim back full capital allowances on plant and machinery As part of the Spring Budget of March 2024, Chancellor Jeremy Hunt has announced a number of changes that will affect drivers and businesses – including an increase in vehicle excise duty, fuel duty freeze and 100% capital allowance on plant and machinery for leasing companies. Here’s how these changes may affect you from April 2024 onwards.
Vehicle Excise Duty (VED) to increase from April 2024
Vehicle Excise Duty (also known as vehicle tax, car tax or road tax) is set to rise again in line with inflation of 10.1% from April 2023 for all cars, vans and motorcycle owners.
The amount of tax you pay will depend on your car’s CO2 emissions and the date it was first registered. For cars registered on or after 1 April 2017, the first-year road tax range will increase from £10 - £2,605 to £10 - £2,745 while the standard rate is being increased from £180 in 2023-24 to £190 in 2024-25. Cars that cost more than £40,000 will have to pay a £390 premium car tax, an increase from the £370 in 2023-2024. The VED range for cars registered between March 2001 and April 2017 is being increased from £20 - £695 in 2023-24 to £20 - £735 in 2024-25. And finally, VED for cars registered before March 2001 will increase from £200 to £210 for 1549cc and below engine cars, and cars with an engine above 1549cc will now pay £345 in 2024-25 as opposed to 2023-24’s £325 tax rate. Fully electric cars don’t have to pay VED until 1 April 2025.
The amount of tax you pay will depend on your car’s CO2 emissions and the date it was first registered. For cars registered on or after 1 April 2017, the first-year road tax range will increase from £10 - £2,605 to £10 - £2,745 while the standard rate is being increased from £180 in 2023-24 to £190 in 2024-25. Cars that cost more than £40,000 will have to pay a £390 premium car tax, an increase from the £370 in 2023-2024. The VED range for cars registered between March 2001 and April 2017 is being increased from £20 - £695 in 2023-24 to £20 - £735 in 2024-25. And finally, VED for cars registered before March 2001 will increase from £200 to £210 for 1549cc and below engine cars, and cars with an engine above 1549cc will now pay £345 in 2024-25 as opposed to 2023-24’s £325 tax rate. Fully electric cars don’t have to pay VED until 1 April 2025.
HGV levy and VED remains frozen in 2024/25
VED for heavy goods vehicles (HGVs) and the HGV levy have been frozen at the current rates in 2024-25.
All heavy goods vehicles that weigh over 12 tonnes pay a levy cost for the wear and tear on the UK roads. During the pandemic, the government suspended this payment for UK-registered HGVs from 1 August 2021 onwards to help reduce cost issues and tackle driver shortages. The HGV levy has since been frozen to support the haulage industry.
All heavy goods vehicles that weigh over 12 tonnes pay a levy cost for the wear and tear on the UK roads. During the pandemic, the government suspended this payment for UK-registered HGVs from 1 August 2021 onwards to help reduce cost issues and tackle driver shortages. The HGV levy has since been frozen to support the haulage industry.
Fuel duty frozen for another year
Fuel duty freeze is being extended for another year so that car owners can keep benefitting from the 5p fuel duty cut.
Fuel duty is tax paid on fuel used to run your cars or to heat your home. It is automatically added to the price you pay for fuel each time you refuel your car. The fuel duty cut was first introduced in 2022 by Rishi Sunak to help with the cost of living crisis. Chancellor Jeremy Hunt has decided to extend the freeze for another year till 22 March 2025 which can help motorists save an average of £50 this fiscal year.
Fuel duty is tax paid on fuel used to run your cars or to heat your home. It is automatically added to the price you pay for fuel each time you refuel your car. The fuel duty cut was first introduced in 2022 by Rishi Sunak to help with the cost of living crisis. Chancellor Jeremy Hunt has decided to extend the freeze for another year till 22 March 2025 which can help motorists save an average of £50 this fiscal year.
Leasing businesses to benefit from full expensing
Vehicle leasing businesses will be able to benefit from full expensing and claim 100% capital allowances on machinery investments in the new financial year 2024-25. The government added that this benefit will be available to leasing companies ‘when fiscal conditions allow’. ‘Full expensing’ means companies will be able to write off the cost of investment in one go, and they will get a tax cut of 25p for every pound a company invests.
Full expensing covers lots of different things including brand-new vehicles and machinery such as vans, lorries, tractors, forklift trucks, pallet trucks, and construction equipment such as excavators, compactors, and bulldozers. Since its introduction last year in the Spring Budget, cars haven’t been covered under full expensing. It's unclear whether car companies would be covered under this scheme or not for this financial year, but the tax break will be extended to vans and trucks leasing companies. Full expensing has been brought in to encourage businesses to make more investments. It is important to consider the capital allowances and other tax implications before you purchase new machinery. You can read more about full expensing on the UK Government Website here.
Full expensing covers lots of different things including brand-new vehicles and machinery such as vans, lorries, tractors, forklift trucks, pallet trucks, and construction equipment such as excavators, compactors, and bulldozers. Since its introduction last year in the Spring Budget, cars haven’t been covered under full expensing. It's unclear whether car companies would be covered under this scheme or not for this financial year, but the tax break will be extended to vans and trucks leasing companies. Full expensing has been brought in to encourage businesses to make more investments. It is important to consider the capital allowances and other tax implications before you purchase new machinery. You can read more about full expensing on the UK Government Website here.
Insurance Premium Tax (IPT) remains unchanged
No measures have been introduced to reduce Insurance Premium Tax (IPT) in Spring Budget 2024.
Motorists are subject to IPT when they buy car insurance. New cars that are bought directly from the dealership are subject to a higher IPT rate of 20% as opposed to other vehicle owners who pay the standard rate of 12%. With the rising insurance premiums, a cut on IPT would’ve been a welcome change for motorists.
Motorists are subject to IPT when they buy car insurance. New cars that are bought directly from the dealership are subject to a higher IPT rate of 20% as opposed to other vehicle owners who pay the standard rate of 12%. With the rising insurance premiums, a cut on IPT would’ve been a welcome change for motorists.