- The Treasury rakes in more than £43billion from private motorists a year
The Treasury is raking in more than £43billion a year from motorists, it has been revealed ahead of this week’s Budget and the expectation for drivers to suffer hiked outgoings at the hands of the Chancellor.
The AA has calculated that the average cost to an average car-owning household in motoring taxes alone is almost £2,000 per year.
Drivers are already bracing for the Rachel Reeves’ Autumn Budget, with fuel duty expected to be increased and car tax (Vehicle Excise Duty) raised again from April.
The AA has calculated that the average cost to a car-owning household in motoring taxes is £1,937 a year, pre-Budget
The motoring organisation crunched the numbers and found that the combination of fuel duty, VED, Insurance Premium Tax (IPT) on motoring policies and VAT on motoring goods and services stings the average car-owning household with a tax bill of £1,937 a year.
It worked out that VAT collects a whopping £23.2billion per annum from drivers, while IPT brings in £4.1bn for the Treasury, VED nets £6.75bn and fuel duty accounts for £9.15bn in income.
Official statistics state that there are 28.4million households in the UK and the Department for Transport’s National Travel Survey indicates that 78 per cent of households or 22.2 million of them have one or more cars.
Divide the £43billion by the 22.2 million car-owning households and the average yearly private motoring tax burden equates to the eye-watering £1,937 outgoing for the average car-owning household.
Yet Ms Reeves is widely expected to add further financial pressure to drivers this week, with fuel duty earmarked to be hiked when the Chancellor takes to the despatch box on Wednesday.
According to HMRC, during the financial year 2023 to 2024, the UK consumed 17.278 billion litres of petrol – the fuel type primarily used by private motorists.
The AA says that if just 3p is added to fuel duty in the Budget, for petrol alone, that would see the Treasury collect an additional £518.34million from fuel taxation per year.
A further £103.67million would be generated in VAT.
It also calculated that, for a car with the average fuel consumption of 36 miles per gallon, the impact of a fuel duty increase will be 0.4p a mile with a 3p hike, and 0.7p per mile if the full 5p-a-litre temporary cut introduced in March 2022 is abolished by Ms Reeves.
The Treasury is raking in more than £43 billion from private motorists even before the Budget on Wednesday.
In the spring Budget, the Office for Budget Responsibility forecasted that scheduled fuel duty rises would increase the tax-take from £24.6billion in 2023 to 2024 to £27.3billion in 2025 to 2026.
HMRC statistics indicate that 2023 to 2024 generated £24.828billion in ‘total hydrocarbon oils receipts’ – £228million more than forecasted.
Edmund King, the AA’s president commented: ‘Motoring taxation is a muddy exercise that hides the true extent of the tax burden on car owners.
‘Only when you tot up the impact of the four main elements (fuel duty, vehicle excise duty, insurance premium tax and VAT on motoring goods and services) does the true burden on the private motorist become clear.
‘But that doesn’t cover what might be called the secondary impact on consumers of motoring taxation. That relates to business motoring and is passed on to the consumer in the cost of goods and services.
‘We can’t be sure what the Budget on Wednesday holds for drivers, but we can be sure that the motoring tax burden on car-owning households is already massive.’