VAT rise; fuel duty held; insurance premium tax; reaction

Chancellor George Osborne has delivered today's emergency Budget, with a VAT rise from early 2011 the hardest hit on motorists' pockets.

The VAT rise to 20 per cent is from 4 January next year. The additional 2.5 per cent will raise the cost of new and used vehicles, servicing and fuel.

It means the list price of a £20,000 car will be £500 more. As an example, a new mid-spec Ford Focus will rise in list price by around £400 under the proposal.

Notably, VAT is added to the price of fuel after fuel tax is applied - so motorists are hit twice, paying a tax on a tax.

In addition, insurance premium tax will rise. The higher rate of insurance premium tax will rise from 17.5 to 20 per cent, while the standard rate will increase from 5 to 6 per cent. This levy will go on top of all car insurance, and has raised fears that more motorists will consider driving without insurance.

However, Osborne has delivered some good news for motorists, saying fuel duty will not rise above already planned rates for the time being.

Already established fuel duty rises were to add another 1p a litre on 1 October 2010 and then another 0.76p on 1 January 2011.

AA president Edmund King said: “We estimate that taking all the increases into account, motorists will, by January, be paying 4.63p a litre more for petrol and 4.68p a litre more for diesel than they are now."

Osbourne did make one concession to motorists, saying that there will be an examination of the impact of oil price rises on pump prices.

This could be the first step to establishing the fuel stabiliser plan that the Conservatives outlined pre-election, and which is designed to introduce variable tax rates according to oil prices, in a bid to keep fuel prices more stable.

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Comments
22

22 June 2010

If he wants to make tax fairer then he should increase the tax on cars that are driving around paying no road tax or £35 tax. No car should be paying less than £120 road tax if the higest rate is like £450.

22 June 2010

we have a choice to buy a car with £450 tax or one that is free to tax.

but i do think it would be fairer for existing cars tax price to be capped at inflation whatever the band it is in. once you buy a car that is the rate you pay for the life of the car, that way you can budget. fuel is fairer to tax as you can just use less or charge extra if claiming it as expenses.

22 June 2010

[quote beachland2]fuel is fairer to tax as you can just use less[/quote]

Im sorry but thats one of the most stupid comments Ive ever heard. Like I have the option of saying "Oh, hi boss, is it OK if I work 3 days a week from now on? Im trying to use less petrol."

People dont pay £1.20 a litre for fuel just for the fun of it. We use fuel to make essential journeys. I dont have the option of "using less fuel". Public transport where I live is non existent & my work is 12 miles away. I have to drive to work or I dont work. Simple as.

currently a happy owner of a Mitsubishi Shogun Pinin :)

22 June 2010

[quote roverfan1984]

[quote beachland2]fuel is fairer to tax as you can just use less[/quote]

Im sorry but thats one of the most stupid comments Ive ever heard. Like I have the option of saying "Oh, hi boss, is it OK if I work 3 days a week from now on? Im trying to use less petrol."

People dont pay £1.20 a litre for fuel just for the fun of it. We use fuel to make essential journeys. I dont have the option of "using less fuel". Public transport where I live is non existent & my work is 12 miles away. I have to drive to work or I dont work. Simple as.[/quote]

Not stupid at all. Your issue appears to be with the iniquity of taxing an every day activity. Death and taxes, as they say.

Beachland2 is saying that if we are going to tax car use then it is fairer to tax per mile and relative to consumption of fuel, i.e. by taxing fuel.

Or would you say that it was fairer to tax car use at a flat rate per car/person, irrespective of mileage driven/fuel use? I wouldn't!

22 June 2010

[quote Johnnytheboy]

Not stupid at all. Your issue appears to be with the iniquity of taxing an every day activity. Death and taxes, as they say.

Beachland2 is saying that if we are going to tax car use then it is fairer to tax per mile and relative to consumption of fuel, i.e. by taxing fuel.

Or would you say that it was fairer to tax car use at a flat rate per car/person, irrespective of mileage driven/fuel use? I wouldn't!

[/quote]

My issue was with the comment that people can just choose to "use less fuel", not with the taxation itself. I think 99% of the country (those of us that, wow, dont live in London! Yes we do exist!!!) could not reduce the mileage they drive even if they wanted to. I was actually quite pleased with the budget incidentally.

currently a happy owner of a Mitsubishi Shogun Pinin :)

22 June 2010

[quote roverfan1984] people can just choose to "use less fuel"[/quote]

I cycle 32 miles a day to my work and back when the sun shines. Haven't used my car since Mid May except at the weekends and am saving over £100 a month. I have to leave a good hour sooner than I would in my car but my commute is a dama site less time than when I lived in Maidenhead and drove into London.

22 June 2010

Also a lot of people still make unneccesary journeys. You can cut your fuel usage by planning your journeys better, using a bike, walking,etc, and thus reduce the tax you pay. Its not always possible, I agree, but most of us can make some changes if we think about it.

It might also result in slightly less congestion for all of us, at those times when you have no option but to use your car, therefore making journeys a bit more pleasurable.

22 June 2010

[quote roverfan1984]My issue was with the comment that people can just choose to "use less fuel", not with the taxation itself. I think 99% of the country (those of us that, wow, dont live in London! Yes we do exist!!!) could not reduce the mileage they drive even if they wanted to. I was actually quite pleased with the budget incidentally.[/quote]

I have never driven in or near london. i have lived all my life in Cornwall and a car is essential. so i dont know what your moaning about. i mean if the tax burden is balanced so that instead of a person paying an extra £50 a year on road tax with 100% certainty, he will pay that £50 a year in fuel duty on mileage, and should something important come up, such as losing your job and becoming unemployed, you have no need to drive as much perhaps, therfore you will save precious cash and still be able to keep your car. its not costing you an ever esclalating amount each year just keep your own property.

i also suggest possibly that if for people that can claim expenses on mileage that is a better option than VED.

and finaly when i talk about the choice of fuel duty compared to VED, even without cutting milage you can still save a lot of money by altering driving style, this is a freedom for us owners to choose when we need to. when i am low on fuel or dont want to use much i really drive mre slowly and carefully through the gears and while slowing down. when i have no care about it i drive more engagingly and with spirit of the revs!

this is a great self regulating tax we put on ourselves. but high VED just takes money straight from our bank account.

22 June 2010

[quote fhp11]If he wants to make tax fairer then he should increase the tax on cars that are driving around paying no road tax or £35 tax. No car should be paying less than £120 road tax if the higest rate is like £450.[/quote]

That's a perfect example of how distorted road taxation has become. Originally the road tax fund was set up to generate revenue for road improvements until it was pillaged one dark day by governments to pay for other things.

They need to re-title road tax or 'vehicle excise duty' to something else since low CO2 cars will still cause wear and tear to roads; granted they are cleaner and more efficient which is a good thing. Why not just go the whole hog and call it 'prop up and bolster everything else tax' so people know what they're getting shafted for - if everyone bought low CO2 cars we'd get done for something else to make up the difference.

22 June 2010

[quote beachland2] have never driven in or near london. i have lived all my life in Cornwall and a car is essential. so i dont know what your moaning about. i mean if the tax burden is balanced so that instead of a person paying an extra £50 a year on road tax with 100% certainty, he will pay that £50 a year in fuel duty on mileage, and should something important come up, such as losing your job and becoming unemployed, you have no need to drive as much perhaps, therfore you will save precious cash and still be able to keep your car. its not costing you an ever esclalating amount each year just keep your own property.[/quote]

Fair comment & I do agree with your point, it wasnt meant to sound like moaning or anything personal. Just annoys me when the green brigade harp on about alternatives to the car- where I live there just arent any!!! & if anyone doubts me I will message them my postcode, my work postcode my hours of work (shifts 10am - 10pm, across 7 days a week (4 on 4 off)) & they can research for themselves!

Same as you my car is essential to me, without it I would literally be stranded. I think people would do well to realise that car ownership is not a luxury to most of us, it is a necessity.

currently a happy owner of a Mitsubishi Shogun Pinin :)

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