Fuel duty freeze, Furlough and SEISS extended – but Chancellor’s budget is light on detail for motoring issues

Rishi Sunak

A freeze on fuel duty and an extension of job support schemes were the relevant highlights of Chancellor Rishi Sunak’s 2021 Budget for the taxi and private hire sector.

Motoring issues

Chancellor Rishi Sunak has continued the freeze on fuel duty charged on petrol and diesel sales for the eleventh year in his 2021 Budget, saying it would not be right to increase the tax during the coronavirus pandemic.

The move has been welcomed by motoring associations. RAC head of policy Nicholas Lyes said: “Drivers will breathe a sigh of relief that the Chancellor has decided not to ‘rock the fuel duty boat’. We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.”

He continued: “Many drivers see their cars as a safe way to carry out essential journeys and believe having access to a vehicle is even more important as a result of the pandemic. If the Chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.”

Howard Cox, Founder of FairFuelUK and secretary for the All-Party Parliamentary Group for Fair Fuel, said: “It would be churlish, not to thank the Chancellor and the Prime Minister for maintaining the freeze in Fuel Duty. Motorists will be pleased at this protracted decision from the Chancellor. They will hope this is just the start of more pro-motoring policies, which have been sadly lacking in this Parliament.”

Future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050, the government said.

The budget was light on detail on motoring issues. Sunak has decided to leave insurance premium tax unchanged, while there was no further commitment to road repairs beyond the 2020 Budget commitment of £500 million a year in pothole repairs over the life of the parliament, and only one new road upgrade was mentioned, a £135m upgrade of the A66 trans-Pennine road.

Vehicle Excise Duty was also not mentioned, but VED rates for cars, vans and motorcycles will be increased in line with the retail price index from April 1, 2021. From April 6, 2021, fuel benefit charges and the van benefit charge will increase in line with CPI.

There was also no mention of electric vehicles and charging infrastructure, and commitments made in 2020, including an extension of the Plug-in Car Grant, still stand. Sunak announced a £375m fund that will invest in “highly innovative companies”, including those in the green technology field, that are aiming to raise at least £20m of funding.

Employment issues and Covid-19 help

The Coronavirus Job Retention Scheme – better known as the Furlough scheme – which was scheduled to finish at the end of April, will be extended until the end of September, chancellor Rishi Sunak announced.

And the Self-Employed Income Support Scheme will also continue, with fourth and fifth grants available to cover the period until the end of September.

Employees on furlough will continue to receive 80% of their salary for hours not worked, up to £2,500 per month, until the scheme ends. However, from July employers will be asked to contribute more to the scheme. Between now and the end of June, the state will pay 80% of wages for hours not worked, while employers will only be asked to cover national insurance and employer pension contributions.

But in July the state will only pay 70%, with employers asked to pay the remaining 10%, and in August and September the state will pay 60% and employers will have to pay 20%. The scheme is otherwise unchanged.

The extension to the SEISS is more complicated, and it will now be offered to some people who were not previously eligible.

The fourth SEISS grant will be worth 80% of trading profits for three months, capped at £7,500. The grant, which is supposed to cover February, March and April, will be worth 80%. Applications will open in April. 

More than 600,000 newly self-employed people will now be eligible to apply. While previously you must have filed a tax return for 2018-19 to apply, those who have filed a 2019-20 return may also be eligible.

As with previous SEISS grants, applicants must state they are either be currently trading but are impacted by reduced demand due to coronavirus; have been trading but are temporarily unable to do so due to coronavirus; intend to continue to trade; and reasonably believe there will be a significant reduction in your trading profits due to reduced business activity.

A fifth SEISS grant, available from late July, will cover the May to September period, but its value will be linked to a change in turnover. If the applicant’s turnover has fallen by 30% or more, they will be able to claim the full grant worth 80% of three months’ average trading profits, capped at £7,500.

But if turnover has fallen by less than 30%, the applicant will only be able to claim a grant worth 30% of three months’ average trading profits, capped at £2,850. It is not clear over which period the turnover change will be calculated.

Taxation and other changes

Elsewhere, a £20 uplift in Universal Credit worth £1,000 a year will be extended for another six months, Sunak announced. And Working Tax Credit claimants will receive a £500 one-off payment. The chancellor also said the Minimum Wage would increase to £8.91 an hour from April.

There are no changes to rates of income tax, national insurance or VAT. The Income Tax Personal Allowance will be frozen at £12,570 from 2022 to 2026, and the higher rate income tax threshold will also be frozen at £50,270 over the same period.

However, Corporation tax on company profits will rise from 19% to 25% in April 2023. The rate will be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000.

Stamp duty holiday on property sales will be extended to June, with no levy on sales of under £500,000. No changes have been made to inheritance tax or lifetime pension allowance or capital gains tax allowances.