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Budget 2015: Ultra low emission vehicles face incentive and tax change review in 2016

Date: 18 March 2015   |   Author:

Company car drivers choosing ultra low emission vehicles should be wary of potential company car tax and incentive changes in next year's Budget.

As part of the Budget 2015 document published after George Osborne's announcement today, part of the full document reveals: "The Government remains committed to reviewing incentives for ultra low emission vehicles in light of market developments at Budget 2016, to inform decisions on company car tax from 2020-21 onwards."

The Government has already announced there will be three new bandings for plug-in vehicles from April to prepare the market for how it will help fund purchases after the current plug-in car grant ends.

The new categories are based on the emissions output and zero-emissions range of each vehicle.
Category 1 vehicles are those that have CO2 of less than 50g/km and a zero-emission range of at least 70 miles. Category 2 vehicles must have emissions below 50g/km and a zero-emissions range of 10-69 miles. Category 3 vehicles have emissions of  50-75gkm and a zero-emission range of at least 20 miles.

It has been confirmed to BusinessCar that the new plug-in vehicle categories will likely inform how much incentive each model type will receive in the future.

This new announcement in the Budget hints that changes next year are likely.

The Office for Low Emission Vehicles administers the grant and said that all vehicles falling into the new categories still have full access to the current £5000 to fund vehicle purchases.

OLEV has now delivered half of its funding after passing the 25,000-vehicle mark since the scheme launched in 2010. The Government has committed to the vehicle plug-in grant until either 50,000 grants are issued or until 2017, whichever is first.

The BVRLA believes the current plug-in car grant will be exhausted by as early as summer 2016.

It could mean hybrids with a smaller zero-CO2 range would receive less grant funding when the next grant is announced. The categories could also inform tax bandings for plug-in vehicles.

BusinessCar asked OLEV if category 2 and category 3 vehicles will receive a smaller grant in the future, but it failed to respond to numerous requests as BusinessCar went to press.