Autumn Statement – Jeremy Hunt denies plans to raise fuel duty plus the BBC ‘road tax’ row

I think I've mentioned this a few times now, but VED has not been based around emissions for new cars since 2017. Stop calling it an emissions tax. 

Have you got a link for that? I thought it was based on emissions?:

The reformed VED system retains and strengthens the CO2-based FYRs to incentivise uptake of the very cleanest cars

https://www.gov.uk/government/publications/vehicle-excise-duty/vehicle-e...

Your link seems to back Mark up.

After the first year (which is usually rolled into the purchase price) there is no link to emissions at all.

You seem to get penalised more for an expensive low emissions car than for a cheap high emissions one.

This is correct, it's only year 1 that accounts for CO2 rating. Subsequent years are a flat rate (then £140, now £165). If the list price was/is over £40k, an additonal uplift (then £310, now £355) is due to the first 5 years. It was introduced because by 2016, most cars on the road were attracting <£100 per year and were leading to a significant reduction in tax receipts.

At the time of introduction, there were some anomalies where for example, a 2017 Ford Mustang 5.0, with a 5 litre engine (CO2 299g/km) could be bought new for around £36k and attract VED at the lower rate, yet a BMW 320d (one of the lowest CO2 vehicles in its class at the time 127g/km) due it being a whisker over £40k attracted the full amount.

Rich_cb is also correct that first year VED, along with registration fees, and delivery, is all rolled into the purchase price, it's a line on the invoice.

Note that all of above applies to vehicles April 2017 onwards, between March 2001 and March 2017, the sliding scale still applies, and pre February 2001, flat rate of £180 or £295 depending on below or above 1549cc. Cars over 40 years old have a rolling exemption due to being considered classic status.

Well it's still based on emissions, even if it is just the first year when that is taken into account.

As imperfect as it is, I think it has helped push more people towards EVs and lower emission vehicles.

Whatever comes next, I do hope they look at the efficiency of the vehicle and the maximum power too. It would be silly if a Citroen Ami attracted the same annual charge as a Tesla Plaid.

And since it stays the same from the date the car was registered, my VED for my Dacia Logan 900cc turbo petrol is £25/year.  Still haven't got to 16,000 miles yet despite its being six years old.

Well thank goodness you don't do many miles considering you hardly pay anything towards the upkeep of the roads!!

I think those very low rates did encourage the purchase of cleaner vehicles, but obviously started to become a bit of a problem in terms of lost tax revenue, hence the 2017 changes.

In some ways, loading the first year with the emissions penalty makes sense. It's the point at which you buy the car where it matters, that choice between a polluting vehicle and a cleaner vehicle. That car will then be on the road for years to come, so the annual charge after that point is largely irrelevant other than for the purposes of raising tax revenue. Especially as the initial purchaser might only be looking to keep the car for 3 years, so might not pay too much attention to the ongoing costs.

VED - Vehicle EXCISE Duty - Not Emmissions. Consider classic cars are exempt and possibly some of the biggest polluters its not based on emissions at all. You could own a 1980s gas guzzling V8 engined car and not pay a penny of VED. I have 3 cars in my family, 1 is a 2014 Fiesta that pays nothing, a 2016 Jaguar diesel that pays £20 a year and a new Audi that pays £165. Id suggest the Audi is the most economical of the 3 and has the cleanest engine yet pays the most. 

All VED paid today on private cars is based upon emissions (plus a luxury levy).

What your collection of vehicles demonstrates is the great improvements in emissions that have occurred over the last couple of decades, mostly down to EU regulations.

This improvement in vehicle emissions, and subsequent reduction in VED revenue, is the reason the levels were changed in 2017. You can't draw comparisons between vehicles of different ages that are taxed under different rules.

Ill use the Jaguar XE (180hp) as an example. It has a 2L Diesel engine. It is exactly the same engine used in the 2L diesel XE 180hp today, The emissions are the same, the fuel consumption is the same. Nothing has change in that engines design in any way but if you buy 2017 onwards the tax is 165 quid a year compared to 20 before. That shows that the VED is not linked to the emissions in any way. Its a luxury tax because of the new price of the vehicle. If you wanted to link it to emissions then the older less effiecient cars should be hit the hardest and lower tax would be put on more effiecient models to encourage getting rid of the older more polluitng ones. But when you consider that the govt is bringing in VED for electric that should show you it doesnt matter if your car is clean co2 free, powered by unicorn farts its still going to be taxed . 

2017 VED is linked to emissions - at the time of purchase (as that's when it can make a difference to emissions).

You can't compare vehicles purchased at different times under different rules. Of course you're now paying more from 2017 for exactly the same engine, as that's the whole reason they changed the rules in 2017; they were losing revenue because new vehicle emissions had improved so much.

Older, less efficient models are hit quite hard - one of our cars is 17 years old, in band J and costs a whopping £330 per year, but barely does any miles.

The rules are changing again (like they did in 2017), to tax EV's because the revenue is dropping. I think it's a bit unfair that they're retrospectively applying this tax to existing EV owners. I also think it's unfair that they're going to only have 2 tiers for EVs.

Making it more about efficiency would be a better idea in my view. Even if you have an EV, that electricity has to be generated somehow. We're nowhere near 100% renewable electricty generation, so vehicles that are frugal with a low kW/mile should be encouraged. The new scheme only seems to differentiate EV vehicles based upon price, which is probably not a bad way to do it, as the more expensive tend to be the more powerful and less efficient. But two levels with not a great deal between them makes it a very blunt tool.

The E stands for Excise. Not emissions, not efficiency. It's just a vehicle tax, Vehicle Excise Duty

Yes, the 'E' does stand for excise. I'm suggesting it could change to efficiency and move from being an emissions based tax to an efficiency base tax.

It could be used to recognise that choosing a small, efficient EV, is beneficial over a larger, less efficient, more powerful EV.

Interesting where did you get those "numbers" from?

Secret_squirrel wrote:

Interesting where did you get those "numbers" from?

If we make the assumption that the average car does 10,000 miles a year, and 8 miles per litre (36mpg), then each car is responsible for 1250litres of fuel a year.

What is the duty/VAT on that fuel? I can't see it being £2 per litre, as even now we pay less than that, I think somewher around £1.20

So in fuel duty and fuel VAT alone, we are looking at £1.5k lost to the exchequer in fossil fuel sales, against this there will be increased electricty use and VAT on that, but much smaller than £1k per year

wycombewheeler wrote:

What is the duty/VAT on that fuel? I can't see it being £2 per litre, as even now we pay less than that, I think somewher around £1.20

According to the RAC 45% of the forecourt price is tax, so it'd have to get very expensive before the government was making £1.20 a litre. Unleaded today is £1.64 a litre (again RAC) so the exchequer will get just under 74p a litre.

Rendel Harris wrote:

wycombewheeler wrote:

What is the duty/VAT on that fuel? I can't see it being £2 per litre, as even now we pay less than that, I think somewher around £1.20

According to the RAC 45% of the forecourt price is tax, so it'd have to get very expensive before the government was making £1.20 a litre. Unleaded today is £1.64 a litre (again RAC) so the exchequer will get just under 74p a litre.

Duty on fuel is not a percentage, it's a fixed 52.95p per litre. It was 57.95p but there's a temporary 5p reduction until March 2023. VAT is charged on this so current duty is 63.54p per litre, regardless of the price at the pump. 

https://www.gov.uk/government/publications/changes-to-fuel-duty-rates/fu...

As Mark says, fuel duty is a flat rate per litre, but fuel (including the duty) also attracts VAT. RAC's 45% figure probably includes VAT and fuel duty as "tax" (and is presumably a rough estimate given that prices fluctuate).

So if the forecourt wanted to sell petrol for £1 per litre before tax, the pump price would be ( £1 + 52.95p [fuel duty] ) * 1.2 [VAT] = £1.84 per L, of which 42% is tax.

mark1a wrote:

Duty on fuel is not a percentage, it's a fixed 52.95p per litre. It was 57.95p but there's a temporary 5p reduction until March 2023. VAT is charged on this so current duty is 63.54p per litre, regardless of the price at the pump. 

Well that's what I get for trusting a motoring organisation! But surely VAT is charged as 20% of retail price, not 20% of the fuel duty, so current revenue at 164p/litre would be 52.95p plus 32.8p VAT? 

Rendel Harris wrote:

... VAT is charged as 20% of retail price, not 20% of the fuel duty, so current revenue at 164p/litre would be 52.95p plus 32.8p VAT? 

Yes, really I was just trying to show the "grossed up" duty element, the tax-on-a-tax, but yes the exchequer gets the net duty plus the all of the VAT. Also the VAT in your example would be 27.3p - VAT is not 20% of the total, it's 20% of the net added on, £1.37 net + 20% (£0.27) = £1.64.

I did comoe across a recent twitter thread where someone posted a picture of taxation on fuel purporting to comoe from a finance company.

They said duty was 29% of the cost and vat is 20% so it's 49% tax overall. So a finance company to avoid !

Yep. Didn't even give enough time to write to your MP in support.

tbf its not a u-turn,yet, there was nothing in the autumn statement about raising fuel duty by 12p.

what the OBR did was say when we get to March 2023, btw that 5p fuel duty cut in the last spring statement has a sunset clause that expires in March 2023, so its coming back in if you do nothing and youve got a scheduled fuel duty rise then as well, those combined would result in a 12p duty rise, even though you havent formally announced them yet.

so Hunt is right the government havent made those decisions yet about what to do with fuel duty, and wont till the next spring statement in March.

personally Id expect the scheduled rise to be frozen again, whilst the cut is just allowed back in as it was a one off temporary cut and never intended to be permanent, but it will depend on the price of oil and what state the economy is in.

eburtthebike wrote:

The only positive thing in this micro-budget (relative to Truss's mini-budget) is that they don't seem to have cut funding for Active Travel, but quite possibly they've hidden those cuts somewhere else.

We've found no sign of any 'hidden' cuts to active travel funding. Mind you, there haven't been any cuts to roads funding either.

The one thing to note though is that, as I understand it, Government departments such as DfT won't be getting increases over the next couple of years to match inflation. Inflation is of course much higher now than when their spending budgets up to 2024/5 were originally set. So, in real terms, their funding allocations for the next couple of years won't buy as much cycling and walking provision - or road schemes for that matter - as they had been expected to.