Spring Budget 2024: what does it mean for motorists?

Motorists to be £50 better off in the next year after no changes were made to fuel duty in the Spring Budget...

Jeremy Hunt holding red briefcase

The Government's 5p per litre reduction in fuel duty will remain in place for the next year, Chancellor Jeremy Hunt has announced as part of the Spring budget.

According to the Chancellor, retaining the 5p reduction will save the average motorist £50 in the next year, and a total saving of £250 since the 5p reduction was introduced in 2022 to counteract high fuel prices caused after the Russian invasion of Ukraine. It equates to a £5bn tax break for motorists. 

In his speech to Parliament, the Chancellor said that the duty drivers pay on fuel will remain at 53p per litre for another year. That means fuel duty will be frozen for the 14th consecutive year.

petrol prices

He also pushed back the planned increase in fuel duty in line with inflation, which was due to come into effect in April. This means fuel duty will stay at the current level until at least April 2025, in a bid to ease the financial strain on motorists at a time when cost of living concerns continue to put pressure on many people. 

At the current rate, fuel duty makes up 36% of the total cost of an average litre of petrol – currently £1.45, and 32% of a litre of diesel, which costs £1.53 on average.

The freeze in tax will come as a relief to motorists, after pump prices rose on average by the largest amount since 2000. Petrol went up on average by 4p per litre and diesel is up nearly 5p per litre, due to the rising cost of oil. That puts the cost of filling up an average petrol car, with a 55-litre fuel tank, £80 and a diesel model to £84. 

Car tax set to increase

The Treasury has already confirmed that the cost of car tax (VED) will go up in line with the Retail Price Index from 1 April 2024. 

For most cars, the annual first-year rate for a new car will go up by between £5 and £10, but drivers of new vehicles with the highest emissions will pay £2745 in the first year, equating to a hike of £140. The cost of each subsequent year will cost £190 for petrol and diesel cars and £180 for hybrid models. 

Only pure electric vehicles will continue to be exempt from VED, but this exemption will expire in April 2025. 

Audi Q4 e-tron charging socket

What has the reaction from the car industry been?

Commenting on the freeze in fuel duty, RAC head of policy, Simon Williams, said: “While it’s good news that fuel duty has been kept low… we don’t believe they’ve fully benefited from the cut that was introduced just two years ago due to [fuel] retailers upping margins to cover their ‘increased costs’. This has meant fuel prices have been higher than they would otherwise have been.”

Elsewhere, head of the Society of Motor Manufacturers and Traders (SMMT) Mike Hawes said not enough had been done in the budget to accelerate the growth of electric cars, calling the announcements "a missed opportunity." He said that "Reducing VAT on new EVs, revising vehicle taxation to promote rather than punish going electric, and an end to the VAT ‘pavement penalty’ on public charging" would have incentivised more buyers to go electric.

Chief executive of the National Franchised Dealers Association Sue Robinson agreed, saying: "The UK remains one of the major markets in Europe with little to offer in terms of price incentives for private buyers of electric vehicles.

"Noticeably, fleet has been driving sales of new cars rather than private buyers. The Government must do more to help maintain momentum in the private BEV market and increase adoption of these cleaner vehicles across the UK."

Vauxhall managing director James Taylor said the budget "has not delivered the acceleration needed to stop the UK's transition to electric vehicles from stalling," and noted that "whilst there are strong incentives for company car drivers to make the switch to electric – including for those choosing luxury vehicles – the private buyer who wants a more attainable small or family car receives nothing."

What Car? says...

While there have been calls for the Government to introduce incentives to encourage people to buy EVs, some car makers are already offering some substantial discounts on their electric models, so there are some tempting deals available. In fact, discounts on EVs have increased by 204% since January 2023, according to What Car? research, fuelled by the upcoming ZEV Mandate and the low uptake of EVs among private buyers.

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Read more: The biggest EV discounts >>