Budget 2017 – What it Means for the Motor Sector

Posted On November 22, 2017 By mhauk

Philip Hammond today delivered his first Autumn Budget and focused on Housing, Inequality and Fairness. Boosted by figures released this week that show that borrowing is likely to be less than original OBR forecasts, so is shrinking as a percentage of GDP, the Chancellor pledged to give away money to invest to secure a bright future.

Areas that Impact the Motor Sector Include:

Vehicle Excise Duty (VED)

Even though there were wholesale changes to VED/road fund licence for new cars from April 2017, a new Vehicle Excise Duty (VED) supplement will apply to new diesel cars first registered from 1 April 2018.

This will mean that their First-Year Rate will be calculated as if they were in the VED band above.

This will not apply to next-generation clean diesels – those which are certified as meeting emissions limits in real driving conditions, known as Real Driving Emissions Step 2 (RDE2) standards.

Steve Freeman, Partner and Head of the MHA Motor sector, said:

“There have been very few tax changes directly impacting on the motor retail sector announced by Philip Hammond today, and whilst this one is unlikely to have the impact that the major reforms from April 2017 had, it may influence some buyers to advance planned vehicle replacements. This may provide a small, but welcome boost to Dealers”.

Diesel Cars

An additional rise in the existing Company Car Tax diesel supplement from 3% to 4%, with effect from 6 April 2018 is being introduced.

This will also apply only to diesel cars which do not meet the Real Driving Emissions Step 2 (RDE2) standards.

Nigel Morris, Employment Tax Director at our member firm MHA MacIntyre Hudson, commented:

“It was heavily rumored that diesel cars would be targeted due to the bad publicity that they receive relating to air quality. It is disappointing that the introduction is only 5 months away and will impact existing vehicles, where drivers were unaware of this increased taxation when making their original choice”

Business Rates

Bringing forward to 1 April 2018 the planned switch in indexation from RPI to the main measure of inflation (currently CPI).

Nathan Sutcliffe, Tax Manager at our member firm MHA MacIntyre Hudson said:

“This will be welcome move for Motor Dealers who have substantial property portfolios and will benefit from a reduced future overhead increase. The impact of the proposed change is a reduction of taxation by £290m in 2018/19 compared to 2019/20.”

Corporate Indexation Allowance 

To bring the UK in line with other major economies and broaden the tax base through removing relief for inflation that is not available elsewhere in the tax system, the corporate indexation allowance will be frozen from 1 January 2018.

Accordingly, no relief will be available for inflation accruing after this date in calculating chargeable gains made by companies.

Nathan Sutcliffe, Tax Manager at our member firm MHA MacIntyre Hudson said:

 “This will be an unwelcome move for Motor Dealers who have substantial property portfolios and will therefore be impacted on future property sales from an increased capital gain tax cost.”

National Living Wage

The National Living Wage is set to rise from £7.50 to £7.83 in April 2018, for those aged 25 and over.

Nigel Morris, Employment Tax Director at our member firm MHA MacIntyre Hudson commented:

“Whilst this is good news for the low paid, it does represent a 4.4% pay rise and means nearly a £600 a year pay increase for full-time workers. However, this ever-increasing burden across the whole wage bill could be very hard for some employers to continue to sustain”.

Other Measures Announced Include:

Stamp Duty

Abolishing Stamp Duty Land Tax altogether on the first £300k for first time buyers.

Personal Allowances

The government recommitted to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament.

From April 2018, the personal allowance will rise to £11,850 (£11,500) and the higher rate threshold to £46,350 (£45,000).

Nigel Morris, Employment Tax Director at our member firm MHA MacIntyre Hudson said:

“This is some good news for employees and will help many households manage the impact of inflation and price rises on the high street.”

Class 4 NIC

The government reaffirmed that the main rate of Class 4 National Insurance contributions will increase from 9% to 10% in April 2018 and to 11% in April 2019 to reduce the gap in rates paid by the self-employed and employees. This will impact self-employed individuals and those self-employed via Limited Liability Partnership arrangements.

Nigel Morris, Employment Tax Director, expressed concern that these measures, whilst a step by the Chancellor to address the £5bn a year difference in NIC between the employed and self-employed, may impact the genuinely self-employed who do not benefit from increased pensions and benefits.

Contact us

If you would like to discuss any of this in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our national Motor team.

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.