- The Treasury rakes in more than £43 billion a year from private motorists
The Treasury rakes in more than £43 billion a year from motorists, it has emerged ahead of this week’s Budget, with motorists expected to face higher spending due to the chancellor’s actions.
The AA has calculated that the average cost to an average car-owning household is almost £2,000 per year in car tax alone.
Drivers are already gearing up for Rachel Reeves’ autumn budget, which is expected to see fuel duty hikes from April and car tax (vehicle duty) increased again.
The AA has calculated that the average cost to car owners in car tax is £1,937 per year, before the Budget.
The motoring body has crunched the figures and found that the combination of fuel duty, VED, insurance premium tax (IPT) on car policies and VAT on car goods and services is sticking the average car-owning household with a tax bill of £1,937 a year.
It found that VAT collects a whopping £23.2 billion a year from drivers, while IPT generates £4.1 billion for the Treasury, VED brings in £6.75 billion and fuel duty accounts for £9.15 billion in revenue .
According to official statistics, there are 28.4 million households in Britain and the Department for Transport’s National Travel Survey shows that 78 percent of households, or 22.2 million of them, have one or more cars.
Divide the £43 billion by the 22.2 million car-owning households and the average annual tax burden on private cars amounts to an eye-watering £1,937 going out of the average car-owning household.
Yet Ms Reeves is widely expected to put even more financial pressure on drivers this week, with fuel duty set to increase when the Chancellor heads to the dispatch box on Wednesday.
According to HMRC, Britain consumed 17.278 billion liters of petrol – the fuel type mainly used by private motorists – in the 2023 to 2024 financial year.
The AA says that if just 3p were added to fuel duty in the Budget on petrol alone, the Treasury would collect an additional £518.34 million in fuel tax annually.
A further £103.67 million in VAT would be generated.
It also calculated that, for a car with an average fuel economy of 36 miles per gallon, the impact of a fuel tax increase will be 0.4 per mile with a 3 cent increase, and 0.7 cents per mile if the full temporary 5p-per-litre The cut introduced in March 2022 will be scrapped by Ms Reeves.
The Treasury is raking in more than £43 billion from private motorists, ahead of Wednesday’s Budget.
In the spring budget, the Office for Budget Responsibility forecast that planned fuel duty increases would boost tax revenues from £24.6 billion in 2023 to 2024 to £27.3 billion in 2025 to 2026.
HMRC statistics show that the period 2023 to 2024 generated £24.828 billion in ‘total hydrocarbon oils revenues’ – £228 million more than forecast.
Edmund King, chairman of the AA, commented: ‘Car taxation is a muddy exercise that obscures the true scale of the tax burden on car owners.
‘Only when you add up the impact of the four main elements (fuel excise duty, vehicle excise duty, insurance tax and VAT on car goods and services) does the real burden for the private motorist become clear.
‘But that doesn’t cover what you might call the secondary impact of car taxes on consumers. This relates to business driving and is passed on to the consumer in the costs of goods and services.
‘We can’t be sure what Wednesday’s Budget has in store for motorists, but we can be sure that the car tax burden on car owners is already huge.’