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Mike Waters' blog: 21 January 2014 - A changing picture

Date: 21 January 2014

Mike Waters is senior insight & consultancy manager at leasing and fleet management company Arval

Until the Chancellor's Budget in March, I can't say for sure what the tax position will look like for the rest of the year and beyond, but don't expect it to remain static.

The full range of vehicle related taxation is now directly linked to the environment - in short, the more efficient your vehicle, the less you tend to pay.

However, the Government faces the issue that as vehicles become more efficient, the tax pot shrinks.

They also need to ensure that taxes like fuel duty, road tax, national insurance, benefit in kind and capital allowances continue to encourage the take-up of the best performing vehicles from an environmental perspective.

Motivated by European targets and the desire to meet market expectations, the manufacturers have made huge improvements to vehicle efficiency in recent years.

Better fuel consumption, combined with falling CO2 emissions, has provided cost effective options. Almost every new car that is launched is more efficient than its predecessor.

So as cars improve, you can expect the tax thresholds to also reflect this. The Government will move with the market, setting levels of taxation to reflect the current performance of new cars and vans entering the market, not to reflect the vehicles of three or four years ago. 

Within this context, it's important to have sight of current Government policy along with a feel for what may happen in the future. Changes to taxation mean that the cost of a car today may be very different to the cost in the future.

Unless you are the Chancellor, it's impossible to know exactly how the fiscal policy will change. However, if you look at the last few years there is a clear trend, and I expect taxation will continue to actively push people towards efficient vehicles.

Therefore, the lower emitting your vehicle is, and the better its fuel consumption, the better the position you will be in. 



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