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3 Mar 2021

Budget 2021: Fuel duty frozen for 11th consecutive year

Fuel duty is to be frozen for the eleventh year running, Chancellor Rishi Sunak has announced

In a highly anticipated Budget speech, Chancellor of the Exchequer Rishi Sunak cancelled the proposed fuel-duty rise, to provide a small respite for motorists from the increasing costs of motoring.

Addressing the Commons, Mr Sunak said: '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 cancelled.'

Unlike last year's Budget announcement, when major investment pledges were made to electric car charging infrastructure, as well as the extension of the plug-in car grant, there was no mention of further support for the automotive sector in today's speech.

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For the latest Budget developments, head to our main coverage - Budget 2021: what you need to know.

What does the fuel-duty freeze mean for me?

The move means that duty applied to each litre of petrol and diesel remains at 57.95p, and 31.61p per kilogram of liquefied petroleum gas (LPG) - the same as it has been since 2009.

According to the Government's own Budget report, the 11-year freeze on fuel duty has saved the average driver around £1,600 overall, compared with the duty 'escalator' system in place before 2010.

What do motor industry figures think?

The freeze has been welcomed by industry figures.

Brian Madderson, Chairman of the Petrol Retailers Association (PRA), said: 'As the PRA has campaigned heavily against any rises in fuel duty, we naturally welcome the Chancellor's decision today. Fuel duty is a regressive tax on business and livelihoods so any attempt to increase it would have been entirely counter-productive as the economy gets back on track.'

His tone was shared by the RAC's head of policy Nicholas Lyes: 'Drivers will breathe a sigh of relieve that the Chancellor has decided not to 'rock the fuel duty boat'. We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.

'Many drivers see their cars as a safe way to carry out essential journeys and believe having access to a vehicle is even more important as a result of the pandemic. If the Chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.'

Car tax to increase in line with RPI

In further news for motorists, the 2021 budget sets out that car tax (officially known as Vehicle Excise Duty) is to rise in line with the retail price index (RPI) from April 01, for all cars, vans and motorcycles, although is frozen for HGVs.

As previously, the rate payable is based on your car's CO2 emissions, with some lower emissions bands unchanged in their first year of registration. The 'standard' rate (payable from year 2 onwards on all but zero-emission models) has risen £5, to £155 for conventional petrol and diesel models, and £145 for alternative fuel cars (e.g. LPG).

The additional charge levied against new cars costing over £40,000 for the first five years has also risen by £10 to £335 per annum.

Listen:our experts discuss the Budget on the Which? Money Podcast.