CHANCELLOR George Osbourne has delivered his first Budget today – but what does it mean to car dealers?

Aimed at dramatically reducing the deficit the red box contained some bombshells, which included:

VAT – will rise to 20 per cent from January 4, 2011. This is the most worrying for car dealers as it puts the price of all cars up in what’s already a tough time for the industry.

Income tax – personal income tax allowance rises by £1,000 to £7,475. This stops 880k people paying income tax completely giving some people more free cash.

Small companies tax rate – to be cut to 20 per cent next year

Corporation tax – cut from 28 per cent to 24 per cent

National insurance – employers’ threshold will rise

Annual investment allowance for companies reduced to £25,000 a year

Capital gains – from midnight higher rate tax payers will pay 28 per cent on capital gains

Pensioners – pensions to start rising inline with earnings from April 2011. The grey pound may well be the one dealers will want to chase again – good news for city car sellers…

In real terms that VAT rise means the cost of a Ford Fiesta Studio will go up by around £300 next year while a BMW 3-Series will increase by about £550. And if you’re selling a Porsche GT2RS – prepare to tell customers they need to find £4,000 more…

It makes sense for dealers to promote the VAT rise heavily – explaining why it makes sense to buy a new car this year instead.

There were no rises announced for fuel though – a big bonus with petrol and diesel currently priced as high as it is. Cigarettes and alcohol also escaped rises in duty – and the Chancellor reversed the cider rate rise announced by Labour.

Osbourne also announced he won’t be cutting capital spending – this means the construction industry will be sheltered and these workers are more likely to be still confident to splash out on cars.

But public sector workers weren’t so lucky. There will be a two-year pay freeze here, but the 1.7m lowest paid will get a flat £250 pay rise.

Housing benefits were cut and child benefit frozen for the next three years – both of which will put a squeeze on consumers’ wallets.

The chancellor added growth in 2010 had been revised down from 1.3 per cent to 1.2 per cent – but growth for the economy in 2011 was predicted to be 2.3 per cent.

A bank levy was also announced – this will be introduced in January 2011. It will eventually generate £2bn a year for the Treasury. Whether this could spell the end of free banking remains to be seen – something that would further squeeze consumers’ wallets.

by JAMES BAGGOTT

Tags: Budget

This entry was last updated on Tuesday, June 22nd, 2010 at 5:43 pm and is filed under News.