Motorists to be hit by inflation-linked increase in car tax

Motorists received a Budget boost as fuel duty has been frozen for the 11th year in succession – but they will be hit by an inflation-linked increase in car tax.

Rishi Sunak, the Chancellor, announced the rate will remain at 58p per litre for petrol and diesel at a cost of nearly £800 million to the Treasury.

He told the Commons: “Right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel. So the planned increase in fuel duty is also cancelled.”

The Treasury estimated the cumulative saving for the average car driver was £1,600 compared to the pre-2010 escalator.

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However, the Treasury signalled this could be the last year that fuel duty remains frozen. “Future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050,” warned the Budget red book.

It said it would also uprate vehicle excise duty (VED) rates for cars, vans and motorcycles in line with inflation from Apr 1, 2021. Heavy goods vehicles will however escape the increase as part of a bid to boost the haulage industry.

Company car benefits will also be hit with increased charges in line with consumer price inflation.

AA president Edmund King welcomed the fuel duty freeze as keeping the UK on track for recovery. “It will be welcomed by the car-dependent, key workers and all businesses that rely on road transport,” he said.

“It will also help clinically vulnerable people who need to avoid public transport to keep safe due to the pandemic.”

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Craig Mackinlay, the Tory chair of the All-Party Parliamentary Group (APPG) for Fair Fuel, said: “The electorate resoundingly rejects the green lobby’s unpopular policies at repeated elections. The Chancellor is quite right to dismiss their call for an increase in fuel duty too.’”

But Mike Childs, of Friends of the Earth, said the continued fuel duty rise meant it was “no wonder passenger cars’ contribution to the climate crisis has barely fallen in the past decade.

“The sale of gas-guzzling SUVs are a particular concern, as they have helped drive a rise in average emissions from new cars in the last five years. Rishi Sunak should be doing more to discourage the purchase of these polluting vehicles – such as slapping a significant increase in road tax on them.”


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