Chancellor of the Exchequer George Osborne has announced changes to road tax and company car tax in his 2014 Budget – but has cancelled a rise in fuel duty planned for September.
The announcement was widely expected. 'I am cancelling this September's fuel duty increase altogether,' said Osborne. 'Fuel is now 20p [per litre] cheaper than it would have been,' he claimed, had the fuel duty escalator been implemented as planned.
Fuel prices in the UK are cheaper than at the same time in 2013, but in tax terms the fuel duty freeze means that the cost of refuelling a car will remain unchanged for now. According to petrolprices.com, the average price of petrol is 129.4p a litre, while diesel is 136.5p a litre.
This means that it will cost £71.17 to fill the 1.0-litre Ecoboost version of the UK's best selling family car - the Ford Focus – while the 1.6-litre diesel version costs £72.35 to fill.
The Chancellor also announced the Government has applied to the European Commission for a 5p-per-litre discount on fuel in the 17 most rural parts of mainland UK.
Road tax and company car changes
Road tax (VED rates) rise in line with inflation for all cars in Band D upwards. Depending on the band, between £5 and £10 per year is added after the first year's duty.
Company car tax rates for 2017/18 and 2018/19 have also been set out, with rates set to rise by 2% for all cars emitting more than 75g/km. The maximum tax rate will be capped at 37%. This means that by 2018 all cars emitting 180g/km or more will be liable for the maximum 37% company car tax rate.
In addition, the difference between the bands at the lower end of the scale is set to be narrowed. Cars emitting less than 50g/km of CO2 will pay 9% company car tax in 2017/18 and 13% in 2018/19. Owners of cars emitting between 51g/km and 75g/km will pay 13% and 16% over the same period.
The Chancellor pledged £200m to repair damage to UK roads. According to reports by Warranty Direct, damage to cars caused by potholes amounts to £730m each year.
Local authorities will bid for a share of the funding, which falls some way short of the £10 billion that the Asphalt Industry Alliance estimated needed spending to fix the problems in 2012.