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Breakdown of the price of standard petrol in UK
Photo credit: The Times
Statement review - serious concerns over inflation and the
rise in the cost of living
With the combination of the rises seen in energy
costs, National Insurance bills rising from April and motor fuel costs
, the spiralling cost of living in the UK will continue pushing the
headline monthly inflation figures well above the Bank of England's
(BoE) target. Pressures for wage increases are seen in many sectors.
Although motor fuel prices have fallen considerably
since the last Budget uncertainties over resumed rises from the effects
of the continuing war in Ukraine, there will be continuing strong
pressure for not only continuing the fuel duty freeze (it has been
frozen for 12 years) but also pressure for cutting the rate of fuel
duty and associated taxes and VAT thereon.
It's worth noting that without any reference to an extension from
the Chancellor the fuel duty freeze will automatically end. That's
because existing legislation around fuel duty stipulates how much
it goes up by each year. Fuel duty is 57.95p per litre of petrol
or diesel in the UK and the rate has been frozen for 12 years
by successive Conservative chancellors.
UK public warms to road pricing - reform of motor taxes
With an increasing rate of take-up of electric
cars and the retirement of petrol and diesel cars - so measures for
replacing fuel duty are likely to appear in a Budget at some stage.
The Government's ban on the sale of new petrol and diesel vehicles
from 2030 has made reform of motor taxes an urgent question for
the Treasury because the switch to electric cars means almost
£30bn in fuel duty raised annually for the Treasury will need
to be replaced. But politicians have shied away from introducing road
pricing as an alternative, however polling for the Social Market Foundation
suggests that the conventional political wisdom that voters are opposed
to road pricing no longer holds true. Its research found that 38%
back road pricing to replace fuel duty and other taxes, with just
over a quarter opposed (26%). The rest were open to persuasion, the
SMF said, and shared a strong public perception that fuel duty was
a heavier burden than other taxes.
The sales trend for electric vehicles (EVs) is significant but EVs
remain a small fraction of all cars on UK roads. Concerns over the
roll out of sufficient charging points to meet the needs of the ban
on new petrol and diesel vehicles by 2030 are growing.
VED exemption for classic cars
The rolling 40 year exemption will hopefully
not be removed but it's unlikely efforts to get it extended to a rolling
30 year concession will be considered at this time by the Chancellor.
Capital Gains Tax changes
Unlike other types of investment assets, the
profit you make upon the disposal of a classic car does not generally
attract Capital Gain Tax (CGT). This is because cars are generally
classed as a wasting
asset that is estimated to have less than 50 years
worth of use remaining. Even if the vehicle remains in existence for
a period in excess of those 50 years, the same exemption applies.
is paid when people sell assets such as shares or a second home. There
are rumours that the current CGT rates may be tinkered with and it's
been suggested that CGT rates could be aligned more closely with income
tax rates, which could mean scrapping the current CGT rates of 10%
and 20% (or 18% and 28% for property) and instead making everyone
pay income tax rates on their gains. A report by the Office of Tax
Simplification, published in November 2020, recommended that CGT rates
should be increased to bring them into line with income tax. But it
would be unlikely to raise significant extra amounts of tax, as it
is typically paid by only about 275,000 taxpayers and raises less
than £10bn a year.
There has been much political discussion about
a one-off wealth tax to help pay for the huge debt built up by the
UK Government providing various levels of COVID support measures.
Some would prefer to see a more permanent wealth tax and others are
firmly against it, but there are very few examples of wealth taxes
that work well and over the last few decades many have been abandoned.
The UK already has two ways in which to tax assets: capital gains
tax and inheritance tax. Both of these regimes are far from perfect,
but it arguably makes more sense to deal with some of the flaws in
those two regimes rather than introduce a third asset tax.
The UK Government
has already discounted a one-off wealth tax so, although the conversations
may well continue, but
said in 2022 they "would not expect the
introduction of a wealth tax during this Government. But never say