Budget 2016: how it affects UK motorists

Published: 16 March 2016

► Latest motoring news in #Budget2016
► What the tax changes mean to drivers
► Latest news from Parliament

UK motorists will be hit by a small rise in car insurance bills after the Chancellor announced a rise in insurance tax premiums in today's Budget - but their fuel bills won't increase just yet.

Petrol and diesel duty will remain frozen for the sixth year on the trot, saving the average driver £75 a year compared with the pre-2010 fuel duty escalator set up by the previous administration, according to George Osborne. This despite unusually low oil prices, meaning that pump prices are at the lowest they've been for years.

'It's the tax boost that keeps Britain on the move,' claimed the Chancellor, saying the move rewarded families and businesses alike who depended on cars for their livelihood.

At-a-glance motoring developments in the 2016 Budget

Key developments today in Westminster include:

  • Fuel duty frozen for sixth year in a row
  • Saving typical UK driver £75 a year
  • Government claims '18p a litre lower than under Labour'
  • Small business van driver saves £250 annually
  • Insurance premium tax to rise by 0.5% to pay for extra flood defences
  • 10% of your car insurance premium now goes in tax, up from 9.5%
  • Trials of driverless cars approved for 2017
  • New £15m connected corridor from London to Dover for autonomous cars
  • New tunnel road under Pennines from Sheffield to Manchester
  • New petrol price comparison digital boards trialled on M5 near Bristol
  • Commitment to expand M62 to four lanes with £161m investment
  • £75m upgrades to A66 and A69 northern arteries
  • Tolls on the Severn crossing from England to Wales halved by 2018
  • £50m Pothole Action Fund for 2016-17
  • £130m repair fund for roads/bridges damaged by Storms Desmond and Eva
  • Company car tax to continue being based on CO2 beyond 2021
  • Businesses encouraged to buy low-emissions cars, with 100% First Year Allowance (FYA) extended for a further three years to April 2021

No major changes to VED or car tax were announced today. It's worth noting that Britain's annual tax system for cars will be overhauled in April 2017,  as outlined in the 2015 Budget

Reaction to the 2016 Budget

Here's our selection of reaction from key luminaries in the car industry.

President of the AA, Edmund King

Edmund King tweetQuentin Willson, broadcaster and member of FairFuelUK

'Freezing duty for a sixth year is hugely significant. The Treasury now has five years of evidence to prove that keeping fuel duty low has helped improve GDP, stimulate economic activity and actually improve tax receipts. The Chancellor knows that low transport costs have had an enormous economic benefit to the UK over the last five years.'

Mike Hawes, chief executive of industry body the SMMT

'The 2016 Budget contained some positive measures and we were pleased to see the Chancellor recognise SMMT’s call for greater support for energy efficient technologies, through both the extension of Climate Change Agreements and a forthcoming consultation on the future Company Car Tax treatment of ultra low emission vehicles. However, we were disappointed that the Chancellor has not done more on business rate reform. The removal of plant and machinery from business rates valuation would have encouraged investment in innovative manufacturing technologies, improving still further UK automotive industry productivity and safeguarding our competitiveness.'

James Hookham, managing director of policy, Freight Transport Association

'A further freeze of duties is welcome but the Chancellor missed a chance to give a boost to the stuttering economy by reducing the tax on an essential business input.'

The RAC

Motoring organisation the RAC had pointed out that the Government already takes a whopping 73% of the price of each litre of fuel in tax... so it wouldn't be ethically right to gobble up even more of motorists' hard-earned every time they filled up.

RAC tweet

By Tim Pollard

Editorial director of CAR's digital publishing arm. Motoring news magnet

Comments