Your feedback is essential to help us improve - click here to take our 3 minute survey.

Budget 2021: what the fuel duty freeze means for motorists

Budget 2021: what the fuel duty freeze means for motorists
Image source: Getty Images


Chancellor Rishi Sunak has confirmed in his Autumn Budget that fuel duty will remain frozen for a further 12 months. Here is everything you need to know about this duty, including why it is being frozen and what the freeze could mean for motorists.

What is fuel duty?

Fuel Excise Duty, as the name suggests, is a tax imposed on purchases of petrol, diesel and other types of fuel used in vehicles and for heating.

The tax is usually added to the price of fuel before it is sold.

Budget 2021: what did the chancellor say about fuel duty?

Fuel duty has been frozen since 2011 at 57.95p per litre. It has been due for an increase in the last two budgets.

But with petrol prices recently reaching a record high of 142.94p, the chancellor has decided to postpone the hike.

Speaking to MPs, the chancellor said: “With fuel prices at the highest level in eight years, I’m not prepared to add to the squeeze on families and small businesses. To keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel, so the scheduled rise in fuel duty is cancelled.”

What does the fuel duty freeze mean for motorists?

Fuel duty was expected to go up from 57.95p per litre to 60.79p in the Autumn Budget. This would have cost motorists an extra £66 a year per car.

According to Mr Sunak, the continuation of the fuel duty freeze for the twelfth consecutive year would amount to savings of £8 billion for drivers over the next five years. In the years that it has been frozen, the average driver has now saved a total of £1,900.

Compared to pre-2010 plans, the freeze means that the average tank of fuel will cost around £15 less per car. For vans and HGVs, the cost of a tank will be £30 and £130 less respectively.

The freeze offers some relief to UK motorists who, in addition to having to cope with rising fuel prices, have suffered from supply shortages owing to a scarcity of lorry drivers. The fuel crisis led to motorists having to queue for hours to fill their cars. Some petrol stations were forced to introduce fuelling limitations to prevent over-fuelling.

While things have improved supply-wise, a fuel duty rise would have almost certainly led to a rise in fuel prices. This would have placed an extra burden on families whose finances are already strained.

Despite the freezing of fuel duty, some feel that the chancellor could have done more to help motorists. For example, according to Simon Williams, fuel spokesman for RAC, a temporary reduction in value-added tax (VAT) would have provided motorists with considerably greater relief during these tough times.

How can you deal with the rising cost of living?

It’s no secret that the cost of living is going up in the UK. That’s clear from the steep increases in energy and food prices. So make sure you are taking steps to protect your finances.

Start by preparing a budget to help you keep track of your incomings and outgoings and ensure that you are not overspending.

Check also whether you are getting the best deals on services like gas, electricity, car insurance, and home insurance, among others, and make the switch to a different provider if it could save you money.

Pay 0% interest on new purchases and balance transfers for 22 months – and earn reward points every time you shop!

The M&S Shopping Plus Credit Card* offers shoppers a 22-month 0% interest period on both new purchases and balance transfers. Not only that but you can also earn retail reward points every time you spend – whether in store at M&S, or elsewhere.  21.9% representative APR (variable)

*Affiliate Partner.

Was this article helpful?
YesNo

Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.