Budget 2014: Osborne freezes fuel duty but raises road tax

FUEL DUTY was frozen once again in this year’s budget, as the chancellor confirmed that the increase planned for this September would be scrapped.

George Osborne also pledged an additional £200m for local authorities to repair potholes following heavy rainfall and flooding this winter, the wettest on record.

But some motorists will have to pay a little more for road tax, which is going up in line with inflation. The owner of an average new car emitting 128g/km CO2, such as a Ford Focus 2.0 TDCI, will still pay no tax in the first year of registration but will now pay £110 in following years, up by £5 from current rates.

At the higher end, drivers of the most polluting cars which emit more than 255g/km CO2, such as the Mercedes GL65 AMG, will now pay £1,090 for the first year of registration, compared with £1,065 at present.

Osborne’s decision on fuel duty is likely to mean that the tax remains frozen for four year; the last time it went up was in January 2011. Since then, the chancellor has said that he has been following a policy “to help hardworking people keep more of what they earn and of what they save.”

He claimed that the repeated fuel duty freezes mean that petrol is 20p lower per litre than it would have been under Labour plans ahead of the last election. But some motoring groups said that Osborne should have gone further; a pre-budget campaign called for a 3p cut in duty.

“Keeping fuel duty level for a fourth year is very welcome relief for UK drivers but the freeze still leaves the squeeze on families and businesses that rely on four wheels to prosper,” said Edmund King, the AA’s president. “Now that we know, from official figures, that inflation-hit earnings are effectively at 2002 levels and car use is struggling to revive, perhaps a short-term cut in fuel duty would have got the UK properly mobile again.”

Most drivers are unlikely to notice a big difference as a result of this year’s budget. Classic car owners may well do so, however. Owners of vehicles built before 1 January 1973 have been exempt from road tax for several years. Now this threshold will increase by a year every April, so that any car that reaches its 40th birthday now or in the future, will be free to tax.

Company car tax drivers will also have to pay more. The proportion of a car’s list price that is subject to tax will increase by 2% in 2017 and 2018.

Osborne also confirmed that all drivers will be able to pay road tax by direct debit from October 1, and will have the option of splitting the fee into monthly or biannual payments, albeit for a 5% fee. Drivers will no longer have to display a tax disc from this date.