Sunak announces biggest cut to fuel duty rates ever

Sunak announces biggest cut to fuel duty rates ever

Rishi Sunak, the Chancellor of the Exchequer, has today presented the Spring Statement 2022, or ‘mini budget’, to the Commons.

With the situation in Ukraine heavily informing the opening of the chancellor’s speech in particular, this year’s Spring Statement necessarily covered a lot of ground. Sunak asserted that the sanctions imposed on Russia were working, but would not be cost free. As such, he framed his speech around measures to alleviate the cost of living crisis.

But which measures will have the biggest impact on motorists? Here are some of the main points, with particular focus on electric vehicles (EVs).

The first key point to note is that the Chancellor has cut fuel duty by 5p a litre, the biggest cut to fuel duty rates ever, and a measure that will come into effect from 6pm this evening.

This is undoubtedly good news for hard-pushed families hit by higher fuel prices. But it is worth noting that, while this measure is probably welcome overall, it certainly does little to incentivise electric vehicles, which are cheaper to run than conventional vehicles, at a time when the government is supposedly encouraging drivers to make the switch to electric.

Second is a measure that will help to keep charging costs down for EV drivers with access to a home charging device. Sunak announced that the government will expand the scope of VAT relief available for energy saving materials. This means that households having energy saving materials installed will no longer pay 5% VAT, with that rate now cut to 0%. The measure covers items including heat pumps, turbines and solar panels. The latter will of course help to dramatically reduce charging costs for EV drivers with a home charger (which are not themselves included in the VAT cut).

Finally, the Chancellor also announced a measure that will reduce costs for employers providing company cars. Indeed, Sunak raised the threshold at which workers start paying national insurance by £3,000 a year.

The measure, which comes into effect in July, is intended to help almost 30 million working people, with a typical employee benefitting from a tax cut worth over £330 in the year from July. It means that around 70% of National Insurance contributions (NICs) payers will pay less NICs. This should mean that if an employee within that 70% has a company car provided for them by their business, the business will pay less for the Class 1A NICs, which reflects the Benefit-in-Kind (BIK) provided to the employee.

And finally, company car tax (BIK rate) will remain unchanged from April 2022 onwards with most rates being maintained until 2025. That said, the BIK rates for zero-emission vehicles remain highly attractive, rising to 2% from 2022 until at least 2025. In contrast, fuel efficient petrol or diesel cars have BIK rates of at least 20%.

Find out more about Company Car Tax

Find out more about Car Tax

Find out more about Electric Vehicles (EVs)

Olly Goodall

Author:Olly Goodall
Date Updated:23rd Mar 2022

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