Autumn Budget 2024: Fuel duty freeze extended
Wed, 30 Oct 2024
The government has presented its first Autumn Budget with the surprise announcement that a freeze on fuel duty will continue.
However, there is also a big increase in first-year road tax rates for non-electric cars, which will cost buyers of the highest-emitting vehicles thousands.
Here, we outline the big announcements in the Budget when it comes to fuel prices, road tax, EVs – and potholes.
Fuel Duty
In a surprise move, Chancellor Rachel Reeves chose not to increase fuel duty in line with inflation. What's more, she has extended the 5p a litre fuel duty discount for another year.
There are estimates the government could have raised £6bn if the fuel duty discount was removed.
RAC head of policy Simon Williams, said drivers will “breathe an enormous sigh of relief after all the speculation that the 5p cut would be scrapped at the same time as pushing duty up beyond the long-term rate of 57.95p.
“It’s good to see the Government firmly recognising the importance of the car to millions of households up and down the country. Eight-in-10 drivers tell us they are dependent on their vehicles for the journeys they need to make, while 70% of commuters who live in rural areas have no other feasible alternatives to get to work beyond taking the car.
“It’s also worth remembering that even as of today 56% of the total price of a litre of petrol is already tax in the form of fuel duty, and the VAT that is charged on top.”
Howard Cox, founder of campaign group FairFuelUK, said he was “delighted that Rachel Reeves has listened to FairFuelUK supporters and her Party MPs' constituents. She finally recognises that keeping fuel duty frozen is at the core of a laudable journey to economic growth”.
Fuel Finder
The government is introducing a requirement for all UK filling stations to report both prices and the unavailability of fuel within 30 minutes of a change. This will form part of a 'pumpwatch' scheme that the Chancellor intends to see launched by the end of 2025.
Road tax
First Year Rates for Vehicle Excise Duty (VED) will change on 1 April 2025, with the Chancellor strengthening the differential between zero emission, hybrid and regular petrol and diesel cars.
The result is some big increases for higher-emitting petrol and diesel cars.
Zero emission electric cars will pay the lowest first year rate of £10, which will be fixed until 2029-30. It’s up from today’s £0 rate.
Cars emitting 1-50g/km of CO2, including hybrids, will see rates increase from £10 to £110.
Cars emitting 51-75g/km CO2 will increase from £30 to £130.
Significantly, rates for all other cars emitting 76g/km CO2 or more will DOUBLE. A car emitting 91-100g/km currently pays £175, and this will go up to £350. Every subsequent duty rate will rise too.
Examples include a Ford Puma 1.0 Ecoboost mHEV, where the first year rate will go up from £220 to £440. A Nissan Qashqai 1.3 DiG-T will rise from £270 to £540. A Volkswagen Golf GTI goes up from £680 to £1360.
The steepest increase is for cars emitting more than 255g/km CO2, such as the Range Rover V8. Here, the first-year rate will rise from £2745 to a staggering £5490.
VED rates for cars, vans and motorcycles after the first year will also increase in line with RPI from 1 April 2025.
Electric cars
The 'Expensive Car Supplement' of £410 is unchanged. However, with more and more electric cars breaching the £40,000 barrier, the government says it will consider raising the threshold for EVs only – but this will come at a future fiscal event, probably the 2025 Spring Budget.
The Chancellor says she will also invest over £200m in 2025-26 to boost the rollout of EV charge points, particularly on-street charge points provided by local authorities. This did little to impress Om Shankar of charging provider Konect, though. "The government has previously stated its aim to accelerate the rollout of electric vehicle charging, but the budget falls woefully short in this area," they said.
"We need a 500% increase in public EV chargers between now and the end of the decade to meet our stated goals and projected EV demand."
There will also be £120m to support the purchase of new vans through the Plug-in Van Grant.
Company car tax
The government will maintain beneficial company car Benefit-in-Kind tax rates for EVs until 2030 – with the fleet industry breathing a huge sigh of relief.
The rates will only increase by 2% per year in 2028-29 and 2029-30, rising to a 9% BiK rate in 2029-30.
Rates for cars emitting 1-50g/km CO2, including hybrids, will rise to 18% in 2028-29 and 19% in 2029-30. Today, they are as low as 2% for the longest-range plug-in hybrids. The government says the incease in hybrid company car tax is to focus the support on EVs.
All other bands will increase by 1% in 2028-29 and 2029-30 – taking the maximum rate up to 39% by 2029, from today's 37%.
In a further boost to EVs, the 100% First Year Allowances for electric cars and EV charge points will be extended for another year.
Double cab pick-ups
Earlier in the year, HMRC tried to remove the beneficial tax treatment of double cab pick-ups weighing more than 1000kg – but was quickly forced into a U-turn.
Now, the government has confirmed it will indeed treat double cab pick-ups with a payload of one tonne or more as cars, rather than goods vehicles, for certain tax purposes.
From 1 April 2025 for Corporation Tax and 6 April 2026, double cab pick-ups will be treated as cars for capital allowances, Benefit in Kind and some deductions for business profits.
Expect more reaction from the industry as news of this change sinks in.
Potholes
An extra £500m in the road maintenance budget has been announced for 2025-26, which the Chancellor said “more than delivers on our commitment to fix 1 million potholes a year”.
The RAC said it was positive news for drivers as it would allow cash-strapped local authorities to begin fixing roads.
“But it’s vital councils don’t just use the money to fill potholes as this is unlikely to deliver the long-term benefit drivers so badly want to see. We believe greater use of preventative maintenance is essential. Surface dressing roads at regular intervals is a proven, cost-effective way of ensuring potholes don’t appear in the first place, along with resurfacing the worst affected roads.”
Does the premium car tax £40,000 rate include options?
