The Chancellor has delivered his Mini-Budget, with “the biggest package in generations” of tax cuts, welcomed by many but seen as missing opportunities for fleets. Here’s the main points.

The Mini-Budget delivered tax cuts and reforms said to be the biggest in generations but there was no news on company car tax

Today’s ‘Mini-Budget’ fiscal event has set out some of the most significant tax cuts in decades as the Government looks to tackle the rising cost of living and the financial impacts of Russia’s invasion of the Ukraine.

During the Conservative leadership race, PM Liz Truss had pledged to hold an “emergency budget” within weeks of taking office and Chancellor Kwasi Kwarteng has now unveiled his Growth Plan, intended to release the huge potential in the British economy by tackling high energy costs and inflation and delivering higher productivity and wages.

The plan set the ambitious target for 2.5% trend of growth, securing sustainable funding for public services and improving living standards for everyone.

Kwarteng said: “Economic growth isn’t some academic term with no connection to the real world. It means more jobs, higher pay and more money to fund public services, like schools and the NHS.

“This will not happen overnight but the tax cuts and reforms I’ve announced today – the biggest package in generations – send a clear signal that growth is our priority.”

Mini-Budget main points:

Income tax cut a year early

The basic rate of income tax will be cut to 19% in April 2023 – one year earlier than planned – with 31 million people getting on average £170 more per year.

The Chancellor also pledged to abolish the 45% additional rate of tax and the 40% higher rate will become the top rate.

Reverse rise in National Insurance contributions

The Chancellor confirmed his intent to reverse the National Insurance increase, which saw contributions increased by 1.25% in April 2022. Scrapping this will save 920,000 businesses almost £10,000 on average next year, according to the Government.

LeasePlan highlighted that this is a money-saving measure for both employers and employees – although also, specifically, for fleet professionals.

Matthew Walters, head of consultancy services and customer value, said: “Because of the way the tax is calculated for cash allowances and company cars, with NICs forming part of the equation, fleets and their motorists stand to save, too.

“However, it ought to be noted that the Health & Social Care Levy was due to be removed from NICs in April, anyway – so this is only a temporary boon for fleets.

“Separately, businesses should also pay attention to the scrapping of the much-disliked IR35 regulations. Under the new regime, which will take force in April, workers providing their services through an intermediary will, once again, be responsible for confirming their own employment status – rather than the liability sitting with the employer. This could be another significant money-saver for companies and fleets.”

Reverse rise in Corporation tax

The Chancellor also announced that the proposed corporation tax hike from 19% to 25%, announced early this year by the then-Chancellor Rishi Sunak, will be reversed as the Government sets its sights on 2.5% trend rate of growth.

Measures to tackle high cost of energy

The Government also set out plans to tackle the biggest drag on growth – the high cost of energy, which the Chancellor said had been accelerated by Vladimir Putin’s invasion of Ukraine and had driven up inflation.

To tackle this, the Government’s Energy Price Guarantee will save the typical household £1,000 a year on their energy bill while it claims the Energy Bill Relief Scheme will halve the cost of business energy bills, reducing peak inflation by about 5 percentage points.

Infrastructure funding

In a further move to grow the economy, the Chancellor announced plans to accelerate new roads, rail and energy infrastructure. The new legislation will cut barriers and restrictions – the Treasury says it took 65% longer in 2021 to get consent for major infrastructure projects than in 2012. Growth plan documents reveal that infrastructure projects which will be accelerated as fast as possible include the Local EV Infrastructure Fund and Rapid Charging Fund but details haven’t been announced.

New Investment zones to bring business investment

It was also confirmed that the Government is in discussion with 38 local and mayoral combined authority areas in England including Tees Valley, South Yorkshire and West of England to set up Investment Zones in specific sites within their area. Each Investment Zone will offer “generous, targeted and time limited tax cuts for businesses and liberalised planning rules to release more land for housing and commercial development”. These will be hubs for growth, encouraging investment in new shopping centres, restaurants, apartments and offices, and creating thriving new communities.

No further change on fuel duty

Despite hopes of a cut in fuel duty, following the previous cut in the Spring Statement, there was no such announcement.

Trade body Logistics UK said it was a “missed opportunity” and added that even with the changes announced this morning, energy – including fuel costs – will rise to 28% of business costs over the next year.

No news on company car tax

Despite hopes that the Treasury would reveal plan for company car taxation going forwards – addressing the fact that Benefit-in-Kind rates have only been set up until the end of 2024/25 – there was no such announcement.

LeasePlan’s Matthew Walters said new rates of company car tax for 2025/26 and beyond was top of the company’s wish list for the next proper Budget.

“The previous Chancellor, Rishi Sunak, began his time in the Treasury by giving us ample warning of upcoming rates, but the numbers that he provided are now starting to age. “Fleets and motorists entering into new contracts today are unlikely to know how much they’ll be paying in CCT at the end.

“As much as tax cuts, the fleet industry thrives on tax transparency. Prime Minister Truss and Chancellor Kwarteng have to let us see as far into the future as possible.”

Other delayed legislation

While LeasePlan has said that not much was expected from the Mini-Budget, it’s highlighted that some waits for previously promised legislation are “now, frankly, getting silly”.

Matthew Walters continued: “Where is the necessary detail on the ZEV mandate for manufacturers, requiring them to sell a certain proportion of zero-emission vehicles, that was first proposed and consulted on in summer last year? Where is the new system of VED for vans that was first mooted in 2018? Where is HMRC’s work on how we can, to quote Rishi Sunak in 2020, ‘use VED to further encourage the uptake of zero and ultra-low emission cars’?

“We could go on. Even outside of the Treasury’s red books, we’re still waiting for the new public charging rules – so well designed by various government departments, and so desperately needed – to be actually introduced.

“Prime Minister Truss says that she is all about delivery. If that is true, then she needs to deliver on this lengthening backlog.”

Other Mini-Budget points:

• Planned duty rises on beer, cider, wine and spirits cancelled
• Stamp duty to be cut
• Cap on bankers’ bonuses to be scrapped

Industry reaction

LeasePlan’s Matthew Walters said that while this was dubbed a Mini-Budget, the contents were pretty big and the new PM and Chancellor have made a clear statement about how they intend to govern the economy.

But he added: “The challenges facing the economy are big, too. The ongoing effects of Brexit, the pandemic, and now a cost-of-living crisis, mean that the UK faces a number of years of uncertainty and sluggish growth. Even without the Office for Budget Responsibility’s usual economic forecasts, we know that the situation is extremely worrying for many businesses and individuals.

“We also know that the fleet industry is well placed to overcome these challenges, just as we have overcome similar challenges in the past. Not only did we account for half of all new car sales in 2021, but we are also leading the adoption of the cleaner motoring technologies that will define the future.”

But Karl Howkins, managing director of Sogo mobility, expressed concerns about a lack of insights on EV adoption and charging.

He commented: “While any attempts to boost the economy are welcome in a world that’s facing increasing uncertainty and headwinds, the fleet sector must be concerned that the transition to net zero appears to have taken a back seat in this government’s priorities.

“Companies and individuals need further incentives if we are to accelerate the adoption of electric vehicles. While further investment in the charging infrastructure is required if it is to continue to keep pace with demand.”

And James Maden, sales and marketing director at Nexus Vehicle Rental, said that the Government’s renewed focus on mitigating barriers to infrastructure projects in the UK must particularly include much-needed development of our road and charging networks to drive the transition to electric vehicles quickly.

“As we move ever closer towards the 2030 ban on petrol and diesel vehicles, and of course, the ambition for Net Zero in 2050, there is a big job to do in supporting businesses in the transition to greener fleets given rising energy costs.

“Further corporation tax cuts and incentives announced today should buoy industry, but anticipated ongoing challenges mean businesses will likely remain cautious for the immediate future. The additional support announced will act as a small relief for the fleet industry against a backdrop of continued supply shortages and ongoing challenges associated with this – particularly as we approach peak season for the fleet rental sector.”

Meanwhile, the UK’s automotive sector welcomed the statements – the SMMT said the Growth Plan “opens the door towards an automotive recovery with encouragement for investment and tax cuts designed to rebuild consumer confidence”.

And the logistics sector also greeted the news, in particular action on energy prices. Logistics UK added that additional measures, such as changes to IR35 and National Insurance contributions, will give logistics businesses welcome flexibility while the Investment Zones were a positive step.