Speaking at the Conservative party conference today, Theresa May has announced that the rate of fuel duty will stay frozen for the ninth year in a row.
Fuel duty is a tax paid on fuels including petrol, diesel, biodiesel and bioethanol. Since 2011 it has been frozen at 57.95p per litre plus 20% VAT. For a 55 litre fuel tank that is £38.25 in fuel duty for each tank fill up. Fuel duty was scheduled to increase by 2p per litre next April, but the Prime Minister has announced that this rise is to be scrapped.
According to the RAC foundation 61% of the price of petrol and nearly 60% of the price of diesel is taxation.
The freeze means that motorists will continue to pay the same level of tax on the fuel they buy, but this doesn’t mean that filling up tanks will be any cheaper as the price of oil is likely to fluctuate, and wholesale costs absorbed by customers.
The average UK petrol price is currently 130.6p per litre, while diesel is 134.5p. In the past 12 months, average petrol prices have gone up by 11.5p a litre, with diesel up by 14p a litre.
At its current rate, fuel duty accounts for around 3.6% of the Treasury’s yearly income. In 2018-19 it will bring in £28.2 billion according to the Office for Budget Responsibility.
Last month, Chancellor Philip Hammond said that the policy saved drivers money, but could cost the Treasury £38 billion if it continued for another three years.
The Institute for Fiscal Studies thinktank estimates that the policy is costing HM Treasury £9 billion a year.
AA president Edmund King said the freeze would bring relief to millions of UK drivers and businesses. “The high pump prices are already forcing many families to cut back on journeys, household expenditure or both,” he said.
Source: ADI News
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