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27 Oct 2021

Autumn Budget 2021: Fuel duty to remain frozen until 2023

Chancellor curbs tax increases as fuel prices soar
Fuel station queue

Chancellor Rishi Sunak has announced that fuel duty is to remain frozen for the 12th time in a row.

With fuel prices reaching record levels, the news is likely to prove a small relief to motorists, who have also suffered from supply shortages recently.

This week, the average price of a litre of unleaded was 142.8p, while a litre of diesel currently costs 146.5p, based on research by the RAC Foundation.

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What does the fuel-duty freeze mean for me?

The announcement means that duty levied on petrol and diesel will remain at 57.95p per litre, while liquefied petroleum gas (LPG) will continue to be taxed at 31.61p per kilogram.

The government's budget reports estimated that since the freeze began more than 11 years ago, the average car driver will have saved a total of £1,900 in tax, compared with the duty 'escalator' system in place prior to 2010.

Car tax to rise in line with RPI

Vehicle Excise Duty (VED), more commonly known as car tax, will rise in line with the Retail Price Index from 1 April 2022. This applies to all cars, vans and motorcycles, although HGV tax rates have been frozen, to provide some financial respite for hauliers.

As before, first-year tax for new cars is based on a car's official CO2 emissions, before defaulting to standard rate from year two onwards. This remains at £155 for conventionally fueled cars and £145 for alternative fuel cars (LPG and hybrid models). Zero-emissions battery electric and hydrogen fuel-cell vehicles are currently exempt from VED.

Investment to EV infrastructure

While Sunak's Budget speech was light on any further announcements benefitting motorists, the accompanying 'red book' Budget document details further investment in the UK's electric-vehicle charging infrastructure.

To bolster the electric vehicle market and to end the sale of new petrol and diesel cars and vans by 2030, £620m has been pledged to improved public charging infrastructure in residential areas, as well as for targeted plug-in vehicle grants, aimed to improve consumer uptake. This is in addition to the £1.9bn committed by Sunak during the 2020 spending review.

A further £817m will go into the development of EV supply chains, including vehicle manufacturing and battery production.

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