George Osborne with a red briefcase

The motorist’s guide to the 2016 Budget

Last week Chancellor George Osborne strode out of Downing Street, red briefcase in hand, announcing the release of the 2016 Budget. So we’ve sifted through the files to give you a quick rundown of everything changing in the 2016 budget that will be impacting drivers from the good to the bad and everything in between.

The Good

Fuel Duty Freeze

For the 6th year running, fuel duty will maintain its current rate of 57.95p per litre, scrapping his original place to raise fuel duty announced in the 2015 Summer Budget. The freeze in fuel duty should help drivers save a couple of pennies and make the most of the current low fuel prices.

Severn Bridge Toll Halved

Good news for our Welsh readers; the Severn BridgeToll, currently due to drop from £6.60 to £5.40, will see a further drop to just £3.30 (subject to inflation) in line with the construction loan due to be paid off by 2018.

The Bad

Increased Insurance Tax

As if car insurance wasn’t high enough after the recent increase from 6% to 9.5% in November 2015, the Chancellor announce that an additional 0.5%, bringing it up to an even 10%. This small increase will provide funds for flood defences, according to Osborne. On the brighter side, this 0.5% increase is much less than the 3% increase predicted by the AA.

Road Tax

The big news for driver’s from this year’s budget came in the form of an overhaul of the current Vehicle Excise Duty (VED) to be applied to vehicles registered after April 2017. The Chancellor claimed that the current system, which encourages both drivers and manufacturers to invest in lower emissions vehicles to take advantage of the £0 VED on emissions under 100g/km, was ‘unsustainable’ with an estimated 75% of new cars purchased in 2015 falling into the £0 rate.
So what does this mean for motorists? If you’re not in the market to buy a new car, nothing. The new road tax rules will apply to new vehicles registered after April 2017 only. So as long as your car is registered before the next tax year, it’ll be subject to the current system:

Current VED rate – applicable to cars registered before 2017
Current VED rate – applicable to cars registered before 2017

If you were considering buying later in 2017, it may be worth bringing your purchase forward to avoid the hike in tax for lower emission vehicles. Under the new scheme, long term owners of vehicles in bands A, B and C could find themselves over £1000 worse off after 10 years. However, if you’ve had your eyes set on a bit of a gas-guzzler, these new rules may make your car dreams a plausible reality. At the higher emissions end of the VED spectrum, owners of vehicles fall in brackets L and M could see themselves between £2000 and £3000 better off after 10 years.
And for those of you looking for something more luxurious, these new laws will hit you even harder, particularly for more environmentally friendly models. For cars over £40,000, an additional £310 per year is payable for the first 5 years of ownership, even if the car falls into the zero-emissions bracket. And even with this supplement, those vehicles with lower CO2 emissions could end up costing you more in the long term than those with high emissions.

VED rates – applicable to cars registered after 2017
VED rates – applicable to cars registered after 2017

So what has the response been from the industry itself? Mixed. While some have acknowledged that the unsustainability of the current system meant a change was inevitable, many have questioned the environmental ramifications of the flat-rate system. Chief Executive of the Society of Motor Manufacturers and Traders, Mike Hawes, voiced concerns over the impact on hybrid technology, whose sales have grown by 520% in the first half of the year, by the changes to the £0 bracket. And premium brand manufacturers feel that the £310 5-year annual supplement on vehicles over £40,000 sends a negative symbol to the premium automotive industry. However, a spokesperson from Mitsubishi has stated that the company is unconcerned by the new system.

So there you have it, the 2016 Budget and how it will impact your driving and ownership. Happy motoring!

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