How the Budget will affect van operators

Added: 13 November 2018

How the Budget will affect van operators

Vehicle Excise Duty rates for vans will increase in line with the Retail Price Index from April 1, 2019, the Chancellor announced in the Autumn Budget. 

In addition, an increase in the Annual Investment Allowance will help van fleets meet the cost of complying with the impending London Ultra Low Emissions Zone requirements.

VED will be charged at £140 a year for early Euro 4 and Euro 5 compliant vans and at £260 a year for all other vans.  However, to support the haulage sector, the Government will freeze the Heavy Goods Vehicle Vehicle Excise for 2019/20.

To incentivise van drivers to make the cleanest choices, the Government published a consultation on reforming VED for new vans in the 2018 Spring Statement.  Van VED is currently charged at a flat rate, regardless of the vehicle’s emissions.  The consultation explored creating a graduated first year rate for new vans, as is already in place for cars.

The Chancellor published a summary of responses from the consultation in the Budget.  Based on those responses, according to a Newspress report, the Government has decided to:

• Further develop its understanding of the impacts of WLTP on CO2 emissions for vans, ahead of announcing the new rates and bands, for introduction from April 2021.
• Ensure the new system takes into account the weight of the van by introducing a two-category approach.
• Provide ongoing incentives, beyond the first year, for new zero emission, ultra-low emission and other alternatively fuelled vans from April 2021.

The Government will set out its Vehicle Excise Duty bands and rates for vans ahead of Finance Bill 2019/20.

Meanwhile, the Annual Investment Allowance will be increased from £200,000 to £1 million for all qualifying investment in plant and machinery made on or after January 1, 2019, until December 31, 2020, to help stimulate business investment.

The measure answers the call from some fleet suppliers who said increasing the Allowance would help van fleets adapt to the introduction of the London Ultra Low Emissions Zone in April 2019.

Increasing the Allowance to enable fleets to offset the cost of buying new vans from their profits before tax will allow more fleets to buy more new vans and help them with the cost of meeting the ULEZ requirements.

One supplier quoted by Newspress commented: “For most fleets, buying new vehicles is the cleanest and easiest solution if the funding is available – and the Annual Investment Allowance makes the proposition very attractive as long as you use the right funding method.”