Pre-Budget Report Cuts Taxes – For Everyone Except Motorists

So, the Chancellor has decided to cut VAT from 17.5% to 15%. Great, that means everything to do with motoring will be a bit cheaper … right?

Wrong! The sneaky blaggard is raising fuel duty by 2 pence per litre, effective from December 1st, to cover the decrease in VAT. While the VAT decrease is temporary and goes back up to 17.5% in January 2010, will this increase in fuel duty be removed at the same time? Of course it won’t, and as a result we’ll be paying another 2.5% VAT on this extra slice of fuel duty, raking in a few £million extra for the treasury in the years to come.

That’s not all, as in April 2009 there will be a further increase in fuel duty of 1.84 pence per litre and in April 2010 another increase of 0.5 pence above indexation. That’s the way to stimulate economic growth! Don’t forget that this is from a government who, a few weeks ago, were demanding that fuel companies pass on the benefit of falling oil prices to help consumers. OK, and increasing fuel duty helps consumers how?

Additional news is that the anticipated change to the road tax system has definitely been postponed for a year, and all the existing bands of road tax will be increased by just £5. The new rules will now come into force in 2010, so hot hatch owners get a brief reprieval before being hammered.

On the bright side, if you were going to go out this weekend and buy a £15,000 car you should wait until Monday, when the VAT change kicks in. At that point it will be around £320 cheaper, so it’s not all bad news.


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Author: Chris Auty

Voted the Breakthrough Blogger of 2013 by SEAT and the Guild of Motoring Writers , Chris has lived and breathed cars since he was old enough to say 'faster'. With a penchant for hot hatches and an allergy to public transport, he would much prefer to drive a bad car than never drive at all. Fortunately his family has learned to put up with this obsession and the internet has provided a channel for his ramblings.

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