Budget-2021

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BUDGET 2021 - WHAT IT MEANS TO YOU

Fuel Station

Fuel Duty Frozen

It would not be right to increase costs for families with an increase in duties, Sunak said, so fuel duty – the tax on a tank of petrol or diesel – has been frozen for the 11th consecutive year. The cumulative saving for the average car driver since 2010 amounts to £1,600.

Pot hole

Road Maintenance

There was no real mention of Britain’s crumbling road network or its horendous pothole epidemic in the budget. 

Thant said Sunik did anounce in 2020 that there would be a £2.5bn pothole fund as well as pledging £27bn in “new Tarmac” for roads and motorways, which he called the biggest ever investment in the “strategic road network”.

Car Insurance

Insurance premium tax

The Premium remains unchanged. Although a positive outcome, it is dissappointing that this hasn’t been reduced, given the current financial climate.

IPT is calculated based on the annual cost of insurance, which means that those who have higher premiums pay higher tax.

Road tax

VED road tax

Sunak didn’t mention Vehicle Excise Duty in his budget speech but the government will uprate VED rates for cars, vans and motorcycles in line with the retail price index from April 1, 2021.

The government will freeze VED on heavy goods vehicles for 2021-22, to  support the haulage undustry during the pandemic recovery, and will suspend the HGV Levy for another 12 months from August 2021.

Electric Car Charging

Electric cars and charging infrastructure

There is no specific reference to electric cars and charging infrastructure in the 2021 budget speech, and there’s no notation in the Budget 2021 supporting document, either.

Electric cars are exempt from vehicle excise duty — including vehicles that cost over £40,000, which are currently subject to a £320 a year charge for five years from the second year after registration.

The Plug-in Car Grant (PiCG) will continue to 2022-23 following a £403m cash injection. The current is reduced from £3,000 to £2,500 but does excludes electric cars costing £35,000 or more.

Electric car drivers will also benefit from changes to the cost of energy. The Chancellor is “increasing tax on pollution” and from April 2022, he is freezing the levy on electricity while raising it on gas which will ease the cost of recharging electric cars.

Company BIK

company car tax - BIK

The Benefit-in-Kind (BiK) tax rates for petrol- and diesel-powered company cars (including hybrids) aren’t set to change in 2021.

However, fully electric and hydrogen fuel-cell cars will no longer be exempt from company car tax charges. Instead, they’ll be moved into the 1% BiK rate category for the 2021/2022 tax year.

Current VED Rates for 2021

The amount of tax you’ll pay will depend on your new car’s CO2 emissions. A car that emits zero grams per kilometre of CO2 will cost nothing to tax, while petrol- and most diesel-powered cars (including hybrids) that emit between 1g and 50g per kilometre will cost £10 for the first 12 months. This, and the £25 charge for cars that emit between 51g and 5g per kilometre, is unchanged from last year.

However, cars that emit between 76g and 150g per kilometre of CO2 will see their VED rates increase by £5 over the 2020/’21 rate, to £220. The more CO2 a car emits per kilometre, the greater the increase in road tax for 2021. The biggest step-up in VED applies to cars that emit more than 255g per kilometre of CO2. These will cost £2,245 to tax for the first year, which was £2,175 in 2020.

After the initial 12-month period, every petrol, diesel and hybrid powered car will cost £155 per year to tax – which is a £5 increase from 2020 – Cars powered by biofuel or liquid-petroleum gas (LPG) will cost £145 per year to tax.

CO2 emissions First-year Rate (2021) Standard (second-year) rate
(g/km) (Sterling Pound) (Sterling Pound)
Zero 0 0
1 to 50 10 155
51 to 75 25 155
76 to 90 115 155
91 to 100 140 155
101 to 110 160 155
111 to 130 180 155
131 to 150 220 155
151 to 170 555 155
171 to 190 895 155
191 to 225 1,345 155
226 to 255 1,910 155
Over 255 2,245 155

UK company car tax rules: 2020 - 2025

The tables below shows future BIK tax bands (also known as company car tax) based on CO2 emissions of your vehicle.

Cars registered before 6 April 2020:

Company car tax rates for 2023-24 and 2024-25 will be kept at 2022-23 rates * Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance

CO2 (g/km) Electric range (miles) 2020-21 (%) 2021-22 (%) 2022-23 (%) 2023/24 (%) 2024/25 (%)
0 N/A 0 1 2 2 2
1-50 >130 2 2 2 2 2
1-50 70-129 5 5 5 5 5
1-50 40-69 8 8 8 8 8
1-50 30-39 12 12 12 12 12
1-50 <30 14 14 14 14 14
51-54 15 15 15 14 14
55-59 16 16 16 16 16
60-64 17 17 17 17 17
65-69 18 18 18 18 18
70-74 19 19 19 19 19
75-79 20 20 20 20 20
80-84 21 21 21 21 21
85-89 22 22 22 22 22
90-94 23 23 23 23 23
95-99 24 24 24 24 24
100-104 25 25 25 25 25
105-109 26 26 26 26 26
110-114 27 27 27 27 27
115-119 28 28 28 28 28
120-124 29 29 29 29 29
125-129 30 30 30 30 30
130-134 31 31 31 31 31
135-139 32 32 32 32 32
140-144 33 33 33 33 33
145-149 34 34 34 34 34
150-154 35 35 35 35 35
155-159 36 36 36 36 36
160+ 37 37 37 37 37

Cars registered from 6 April 2020:

Company car tax rates for 2023-24 and 2024-25 will be kept at 2022-23 rates * Add 4% for diesels up to a maximum of 37% (unless RDE2 compliant). Diesel plug-in hybrids are classed as alternative fuel vehicles, so the 4% diesel supplement does not apply to these vehicles irrespective of RDE2 compliance

CO2 (g/km) Electric range (miles) 2020-21 (%) 2021-22 (%) 2022-23 (%) 2023/24 (%) 2024/25 (%)
0 N/A 0 1 2 2 2
1-50 >130 0 1 2 2 2
1-50 70-129 3 4 5 5 5
1-50 40-69 6 7 8 8 8
1-50 30-39 10 11 12 12 12
1-50 <30 12 13 14 14 14
51-54 13 14 15 15 15
55-59 14 15 16 16 16
60-64 15 16 17 17 17
65-69 16 17 18 18 18
70-74 17 18 19 19 19
75-79 18 19 20 20 20
80-84 19 20 21 21 21
85-89 20 21 22 22 22
90-94 21 22 23 23 23
95-99 22 23 24 24 24
100-104 23 24 25 25 25
105-109 24 25 26 26 26
110-114 25 26 27 27 27
115-119 26 27 28 27 27
120-124 27 28 29 29 29
125-129 28 29 30 30 30
130-134 29 30 31 31 31
135-139 30 31 32 32 32
140-144 31 32 33 33 33
145-149 32 33 34 34 34
150-154 33 34 35 35 35
155-159 34 35 36 36 36
160-164 35 36 37 37 37
165-169 36 37 37 37 37
170+ 37 37 37 37 37
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