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Autumn Budget 2021: Fuel duty rise and PHEV grant changes on cards

This month’s Autumn Budget could see big changes on fuel duty and plug-in hybrid incentives as the Government shows it’s proactively tackling climate change.

Matthew Walters, head of consultancy services at LeasePlan UK, has warned that the Chancellor doesn’t even need to mention fuel duty during the Budget for the current freeze to lift

The Budget, along with the conclusions of the 2021 Spending Review, will take place on 27 October and, according to reports, the Prime Minister has already refused to rule out a fuel duty rise, despite near record high petrol and diesel pump prices.

Matthew Walters, head of consultancy services at LeasePlan UK, has warned that the Chancellor doesn’t even need to mention fuel duty during the Budget for the current freeze to lift.

“One of the key things drivers and businesses should keep a keen ear out for during the Autumn Budget is any changes to the current fuel duty freeze – or indeed an omission of this in the Chancellor’s statement. It’s worth noting that without any reference to an extension from the Chancellor the freeze will automatically end. That’s because existing legislation around fuel duty stipulates how much it goes up by each year.”

Walters also said that fuel duty income remained the ‘elephant in the room’ as the country waits with bated breath to hear how the Government plans to plug the £28bn gap it faces in the switch to EVs.

The Times reported a year ago that the Chancellor was mulling a per-mile charge to help avert an annual £40bn tax shortfall from both VED and fuel duty from drivers choosing electric vehicles.

In December 2020 HM Treasury’s Net Zero Review Interim Report said the Government would need to consider how to offset these lost tax revenues and the Transport Select Committee opened an inquiry.

“We’re unlikely to see a clear plan this year, but we could see some early indicators…” Walters continued.

LeasePlan also echoed ongoing calls for further transparency on company car tax rates beyond 5 April 2025 to enable fleets and drivers to plan ahead.

“The Office of Zero Emission Vehicles (OZEV) has responded positively to widespread calls for this from industry leaders, but whether or not we’ll hear more on this from the Chancellor this side of Christmas remains to be seen,” said Walters.

He also pointed to potential changes to plug-in hybrid incentives and grants to help drive the green agenda.

“This year’s COP26 summit will be firmly on the Chancellor’s mind. The UK will want to secure its position as a global leader in the fight against climate change and as a key driver behind carbon emission reduction,” he outlined. “For this reason, we could see a broader alignment in regulatory changes and tax incentives towards zero-emission vehicles, i.e. pure EVs, and away from ultra-low emission vehicles such as plug-in hybrids.

“One of the ways the Government could do this is by limiting grant schemes for charge point infrastructure to just those for EVs. This would mean ending the existing OLEV [charge point] grant for plug-in hybrid vehicles.”

Finally, it’s also possible that we’ll see funding ringfenced for the exploration and development of alternative fuels, according to LeasePlan.

“The Government will want to demonstrate that it’s proactively seeking solutions to some of the UK’s biggest transport challenges, such as how to decarbonise HGVs,” Walters finished.

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Natalie Middleton

Natalie has worked as a fleet journalist for nearly 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.

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