Skip to content
What Budget 2016 means for motorists

Blog post -

What Budget 2016 means for motorists

The Chancellor announced today a number of key changes in his Budget, some of which will impact upon motorists. A summary is below, and check the bottom of the this page for links to official RAC commentary on the major motoring announcements.

Motorists and business

Fuel duty – frozen for sixth year in a row. This marks the longest fuel duty freeze in over 40 years and something RAC has put pressure on officials to maintain.

Insurance Premium Tax (IPT) to increase by 0.5% with money ring-fenced for flood defences – increasing costs to motorists by around £52m. The increase kicks in on 1 October 2016.

Government will extend the 100% First Year Allowance (FYA) for businesses purchasing low emission cars for a further 3 years to April 2021.

Reduce the main rate threshold for capital allowances for business cars to 110g/km of CO2 and the FYA threshold to 50 grams/kilometre of CO2 from April 2018, to reflect falling vehicle emissions.

Continue to base Company Car Tax on CO2 emissions of cars, and consult on reforming the lower CO2 bands for ultra-low emission vehicles to refocus incentives on the cleanest cars beyond 2020-21.

HGV VED and Road User Levy rates and bands – From 1 April 2016, HGV and Road User Levy rates, including all other rates linked to the basic goods rate, will be frozen.

Fuel Benefit Charge (FBC) – From 6 April 2017, the FBC multiplier for both cars and vans will increase by RPI.

Van Benefit Charge (VBC) – From 6 April 2017 the main VBC will increase by RPI. The government will extend VBC support for zero-emission vans so that from 6 April 2016.

Company Car Tax (CCT) review – At Budget 2013, the government committed to review the incentives for ultra-low emission vehicles in light of market developments at Budget 2016. From 2020-21, the government will continue to base Company Car Tax on the CO2 emissions of cars and will consult on reform of the bands for ultra-low emission vehicles (below CO2 emissions of 75g/km) to refocus incentives on the cleanest cars.

Halve the price of tolls on both Severn crossings from 2018.

New money for M62 smart motorway (funds being brought forward) and other major road projects.

Wider headline Budget announcements

Small businesses: doubling of small business rate relief – permanent (with 600,000 of the smallest businesses won’t have to pay at all).

Corporation tax cut to 17% from April 2020.

The government is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes.

Small firms to benefit from a commercial stamp duty reform.Some 90% will pay less, or be unaffected, although 9% of firms will pay more.

Budget 2016 announces that, from 6 April 2016, the higher rate of Capital Gains Tax (CGT) will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%.

ISA limit to be increased to £20,000.

Tax Free personal allowance raised. Increased higher rate 40% threshold.

Sugar levy on companies in 2 years. 2 bands (excl fruit juices and milk based drinks).



Press contacts

Related stories

News, comment, data and research from the UK's longest-serving motoring organisation

Our Media Centre is home to all the RAC's content for journalists: press releases, the latest driving and motoring related research, plus images and videos