UK Budget 2020 – transport and other taxes

Mar 23, 2020

Fuel duty has been frozen for the tenth year in a row. And, surprisingly, there were none of the usual duty changes on budget day to beers, wines, spirits or ciders. However, the Chancellor did make clear that future fuel duty rates will be considered alongside measures that are needed to help meet the UK’s net zero commitment.

 A number of other announcements were also made: 

  • Air passenger duty (“APD”) rates will increase in line with inflation for 2021‑22, meaning that short haul rates remain frozen at £13. The rate for long haul economy will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £4. Those travelling long-haul by private jets will see the rate increase by £13;
  • In January 2020, the Government announced that it would undertake a review of APD to ensure that regional connectivity is supported while meeting the UK’s commitment to net zero emissions by 2050. As a result, the Government will consult on aviation tax reform in spring 2020;
  • Vehicle excise duty (“VED”) rates for cars, vans and motorcycles will increase in line with inflation from 1 April 2020. However, the Government will freeze HGV VED and the HGV Road User Levy for 2020-21;
  • From 1 April 2020, the Government will exempt all zero emission vehicles registered until 31 March 2025 from the VED ‘expensive car’ supplement;
  • From 12 March 2020, the Government will reduce annual VED liabilities for most new motorhomes to a flat rate of £265, which will rise to £270 for 2020‑21. From 1 April 2021, the Government will align the VED treatment of new motorhomes and vans;
  • A call for evidence was published which looks at how VED can be used to support the take-up of zero and ultra-low emission vehicles to reduce overall emissions from road vehicles;
  • The Government will reduce most company car tax rates by 2 per cent in 2020-21 for cars first registered from 6 April 2020. However, rates will return to planned levels over the following two years, increasing by 1 per cent in 2021-22 and 1 per cent in 2022-23. Rates will then be frozen until 2024-25;
  • From 6 April 2020, the fuel benefit charge and the van benefit charge will increase in line with inflation;
  • From April 2021, the Government will apply a nil rate of tax to zero-emission vans within van benefit charge;
  • To support the uptake of zero emission vehicles (ZEVs) and ultra-low emission vehicles (ULEVs), from April 2021 the Government will extend first year allowances to ZEVs only and apply the main rate writing down allowance (WDA) of 18 per cent to cars with emissions up to 50g/km. The special rate WDA of 6 per cent will apply to higher polluting cars with emissions above 50g/km. First year allowances for zero emission goods vehicles and natural gas and hydrogen refuelling equipment will also be extended; and
  • Entitlement to the use of red diesel and rebated biofuels from April 2022 will be removed, except for certain uses including agriculture. The Government will also consult on whether the entitlement to use red diesel and rebated biofuels is justified for any other users;
  • Recognising the complexity of the current duty system for alcohol, the Government will review potential reforms to be implemented after the EU transition period, beginning by publishing a call for evidence by the summer;
  • The results of the review into Small Brewers Relief will be published in the spring;
  • Duty rates on all tobacco products will increase by RPI + 2 per cent until the end of this Parliament. The rate on hand-rolling tobacco increased by RPI + 6 per cent from 6pm on 11 March 2020; and
  • Legislate will be included in Finance Bill 2020 to raise the Gross Gaming Yield bandings for Gaming Duty in line with inflation. The revised bandings must be used for accounting periods starting on or after 1 April 2020.