Budget 2024: What it means for motorists
Wed, 06 Mar 2024
- 5p a litre cut in fuel duty remains
- Car tax will rise with inflation from April 2024
- Electric cars to pay road tax from 2025
- Government slammed by car bosses for EV 'inaction'
The 2024 Budget has been announced by Chancellor of the Exchequer, Jeremy Hunt. There was the expected 2p cut in National Insurance as well as changes to child benefit thresholds, but what does the budget mean for motorists?
Fuel Duty
The freeze on fuel duty will remain in place although given that no chancellor has increased fuel duty since 2011, it would have been a bold move to change that.
The 5p per litre temporary cut in fuel duty announced in March 2022 (and due to end later this month) will also remain in place for another 12 months. The long-standing rate of fuel duty of 52.95p per litre will therefore remain frozen – good news for owners of petrol, diesel and hybrid cars.
Average UK fuel prices are currently 144.6p per litre for petrol and 154.2p per litre for diesel. The Government says extending the freeze will save the average motorist £50 in 2024-25.
"With a general election looming, it would have been a huge surprise for the Chancellor to tamper with the political hot potato that is fuel duty," said RAC Head of Policy Simon Williams. "It appears the decision of if or when duty will be put back up again has been quietly passed to the next government."
Car Tax
There are no specific changes to car tax rates, but the previously-announced increase in line with the Retail Price Index comes into effect, which means that road tax rates will increase for almost everyone from April 1st 2024. We will have the new car tax rates published as soon as they are available.
The standard car tax rate for 12 months is currently £180 while for alternative fuel cars it is £170. This applies to cars registered from April 1st 2017.
It is understood car tax rates will rise to £190 and £180 respectively.
Electric Cars
As previously announced, from 2025, electric vehicles will no longer be exempt from car tax. The change applies to electric cars, vans and motorcycles and will "ensure that all road users begin to pay a fair tax contribution as the take up of electric vehicles continues to accelerate", the Government said.
The Government-back EV grant was scrapped in 2022 but there are calls from organisations such as the AA for reintroductions of incentives for electric car buyers. The Society of Motor Manufacturers and Traders (SMMT) has suggested halving the VAT charged on new EVs from 20% to 10% for three years, to kick-start electric sales to private buyers. It called the lack of action "a missed opportunity".
The Government has also failed to correct a "bizarre" tax anomaly where public EV charging is charged at 20% VAT, compared to 5% VAT for home charging.
"As things stand, anyone without a driveway is penalised by having to pay four times the rate of VAT when they charge at a public charger, compared to those who can charge at home," says the RAC.
Ending the VAT ‘pavement penalty’ on public charging "would have energised the market," said the SMMT. "More still needs to be done to help consumers make the switch."
Fiat and Vauxhall slam government over EV inaction
In a surprise move following the 2024 Budget, the bosses of both Fiat and Vauxhall issued strongly-worded statements slamming the government’s lack of action over electric incentives.
"The demand for electric vehicles is waning and we are sleepwalking into an EV crisis," says Fiat MD Damien Dally. "It’s hugely disappointing that the Chancellor has failed to reinstate incentives for electric vehicle buyers."
"The numbers don’t lie: private sales account for fewer than one in five electric car registrations in 2024 – and the overall market share is way below the 22% mandated by the government as part of the ZEV Mandate."
Vauxhall MD James Taylor says the budget "has not delivered the acceleration needed to stop the UK’s transition to electric vehicles from stalling."
"We would call on the Chancellor to urgently set up purchase incentives to stimulate the electric vehicle market and review the unfair taxation on public charging so that the UK isn’t left behind in the race to more sustainable motoring."
Car Insurance
Another major policy that had been suggested – but not acted on by the Chancellor – was a cut in Insurance Premium Tax (IPT) to help reduce the cost of insurance. IPT applies to most general insurance policies including car, home, pet and private medical insurance. The standard rate has doubled to 12% since October 2015
The AA argued for Government to cut Insurance Premium Tax by 25% for all drivers but go further for young drivers with at least a 50% cut.
The lack of any changes to IPT was, says RAC Head of Policy Simon Williams, "enormously disappointing... it would have helped keep spiralling motor insurance premiums in check."
"Younger drivers are disproportionately affected as they end up paying even more in tax on top of their already high premiums. It's high time it was looked at again," he adds.
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