What the Budget means for motorists

Chancellor George Osborne delivered his Budget statement today. The big news for motorists is that the planned fuel duty increase will go ahead, in what the AA has described as a “budget blow-out”.

This means that from 1 August, drivers will have to pay 3.62p more per litre, including VAT. Average petrol prices are already at record highs of 139.67 pence per litre (ppl), while diesel prices are at 146.39ppl.

AA president Edmund King said: “At a time of record prices at the pumps, the August increase in duty is a budget blow-out which will force drivers off the road and could bring a summer of discontent for many.

“Only last week the Prime Minister told US students that UK fuel prices would make them ‘faint’, yet the Government seems intent on inflicting more pain for no gain on drivers. Ironically, such a hike in duty doesn’t necessarily help Government finances, as people will cut spending at the pumps and in shops, and it could fuel inflation.”  

As well as the August increase in fuel duty, road tax will increase across all bands in line with inflation. 

The Chancellor announced a range of company car tax increases, too. The biggest hit is for zero and ultra-low emission vehicles. These cars will no longer be exempt from company car tax from 2015. Owners of electric company cars will have to pay 13 per cent of the vehicle's value in tax, rising to 15 per cent in 2016/17.

The rate for all vehicles emitting more than 75g CO2/km will increase by one per cent in 2014/15, and two per cent in 2015/16 and 2016/17. 

The maximum company car tax rate will also increase from 35 per cent to 37 per cent in 2015/16. In addition, the three per cent diesel supplement will be scrapped from April 2016, bringing diesel rates in line with petrol. 

Osborne said he would look at reforming road tax in the medium term to “ensure all motorists make a fair contribution to maintaining the public finances, and to reflect continuing improvements in fuel economy.” He also wants to introduce a direct debit payment system for VED, so car owners can pay on a monthly basis. 

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