- The Treasury collects more than £43bn from private drivers a year
The Treasury is raking in more than £43bn a year from motorists, it was revealed ahead of this week’s Budget and the expectation that drivers will see their spending rise at the hands of the Chancellor.
The AA has calculated that the average cost to a car-owning household in road tax alone is almost £2,000 a year.
Drivers are already preparing for Rachel Reeves’ autumn budget, with fuel taxes expected to rise and Vehicle Excise Duty to rise again from April.
The AA has calculated that the average road tax cost for a car-owning household is £1,937 a year, before the Budget.
The motoring organization did the math and found that the combination of fuel tax, VED, insurance premium tax (IPT) on motor policies and VAT on motor goods and services hurts the average car-owning household. a car with a tax bill of £1,937 a year.
It turned out that VAT collects a whopping £23.2bn a year from drivers, while IPT contributes £4.1bn to the Treasury, VED generates £6.75bn and fuel taxes account for £9.15bn. pounds sterling in income.
Official statistics indicate that there are 28.4 million 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.
If the £43 billion is divided among the 22.2 million car-owning households, the average annual tax burden on private cars will be equivalent to a staggering £1,937 spent by the average car-owning household.
However, Reeves is expected to add further financial pressure to drivers this week, with a rise in fuel duty when the Chancellor arrives at the dispatch box on Wednesday.
According to HMRC, during the 2023 to 2024 financial year, the UK consumed 17.278 million liters of petrol, the type of fuel mainly used by private drivers.
The AA says that if just 3p is added to fuel duty in the Budget, for petrol alone, the Treasury would raise an extra £518.34 million in fuel duty a year.
A further £103.67m in VAT would be generated.
He also calculated that, for a car with an average fuel consumption of 36 miles per gallon, the impact of an increase in fuel duty will be 0.4 p per mile with a 3p increase, and 0.7p per mile if the full temporary increase of 5p per liter applies. Ms Reeves removes the cut introduced in March 2022.
The Treasury is collecting more than £43bn from private drivers even before Wednesday’s budget.
In the Spring Budget, the Office for Budget Responsibility forecast that scheduled increases in fuel duty would increase tax receipts from £24.6 billion in 2023 to 2024 to £27.3 billion sterling in 2025 to 2026.
HMRC statistics indicate that £24.828 million in “total hydrocarbon oil revenue” was generated between 2023 and 2024, £228 million more than predicted.
Edmund King, president of the AA, commented: ‘Car taxation is a confusing exercise which hides the true extent of the tax burden placed on car owners.
‘Only when the impact of the four main elements (fuel tax, vehicle excise tax, insurance premium tax and VAT on motor goods and services) is added up does the true burden on the driver become clear. private.
‘But this doesn’t cover what might be called the secondary impact of car taxes on consumers. This refers to corporate motoring and is passed on to the consumer in the cost of goods and services.
“We can’t be sure what Wednesday’s budget holds for drivers, but we can be sure that the car tax burden on car-owning households is already enormous.”