The Chancellor has increased the cost of motoring for small businesses.
The key figures are the £200 rise in VED for vehicles with emissions above 226g/km (band G).
This rise to £400 will be phased in over two years: £100 immediately; a further £100 in 2008-09.
More modest rises occur in bands D to F (151g/km to 225g/km).
Most small businesses use private vehicles for work purposes. A recent Croner reader survey reported 98% of businesses used their vehicles for work-related travel.
Chancellor Gordon Brown added that the statutory mileage rates, known as AMAPs, will also be reformed ‘to promote environmentally friendly business travel’.
Small business owners use AMAPs to reimburse themselves for business travel. Currently they are set at 40p per mile for the first 10,000 miles.
Additional costs will arise from proposed changes to capital allowances due for introduction in 2008 following consultation.
These will place vehicles with emissions above 165g/km in a pool with lower writing down allowances. Vehicles with CO2 emissions above 165g/km include the VW Golf GTI, Mercedes C-class C200 CDI, and Ford Mondeo 1.8 Zetec.
Meanwhile fuel duty will increase by 2ppl from 1 October 2007.
“The Budget is changing the cost impact to business,” commented Nigel Morris, senior manager employer solutions, Deloitte.
“There’s an upward dynamic across the board, particularly with the 100% increase in VED duty for cars in band G over two years. There is also a possible impact on residual values. These cars could lose additional value.
“The other element to consider is the change to capital allowances. If you choose an inappropriate vehicle, then it could take longer to recover your costs.
“So looked at broadly the message is clear: small businesses will need to choose lower emission vehicles to keep costs down in the future. Particularly if the currently generous AMAP scheme is revised along CO2 lines.”
For Budget 2007 in detail, click on this link Key points of Budget 2007
Budget 2007 increases VED by up to £200
