Spring Budget 2024: Impact on the automotive sector

The 2024 Spring Budget was seen as the last chance the Government had to sway voters before an election. With a decidedly lacklustre response to the already reported 2p cut to employees’ National Insurance, the signs were not good. In an (at times) rather ill-mannered House of Commons, the Chancellor seemed to be trying to score political points at every turn and highlight what he saw as Conservative party successes. Jeremy Hunt says that “great Budgets change history” but we will have to wait to see whether his speech will influence the political landscape in the future.

From an automotive perspective, however, the question is always whether the Chancellor’s announcements will either improve consumer confidence and spending power or have a positive effect on motor retailers directly. Whilst any cut to National Insurance is always welcomed, the 2p cut only provides a saving of £450 for an average worker and we continue to feel the stealth tax effect of the freezing of the personal allowance and tax thresholds. It is unlikely that this will make households feel more confident about discretionary purchases, such as motor vehicles, and we may continue to see restraint as household finances remain stretched.

It was also disappointing that the Budget contained no measures to encourage the take up of electric vehicles (EV), whether assistance with the cost of acquisition for consumers or further infrastructure investment. This would seem to be short-sighted and at odds with the introduction of targets for EV adoption.

 Announcements that could affect you or your automotive business include the following:

• Fuel duty – extension to the 5p cut on fuel duty and freeze at the current rate for the next 12 months.
• Full expensing for capital expenditure - technical consultation on extending full expensing to assets for leasing – this could benefit auto retailers who also operate a large rental vehicle fleet.
• Child Benefit – reforms to the operation of the High Income Child Benefit Charge (HICBC) including an eventual move to a household income basis by April 2026.
• Capital Gains Tax on residential property – reduction in the higher rate of Capital Gains Tax for residential property gains from 28% to 24% from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
• Abolition of Furnished Holiday Lettings (FHL) tax regime – with effect from 6 April 2025 the tax advantages enjoyed by landlords of FHLs compared to those leasing residential property to long-term tenants will be removed. Draft legislation will be published soon.