The corona-virus has historically affected the world. It has changed the British economy and the recovery will be a long and challenging process. As a result, the Chancellor Rishi Sunak’s budget reform focuses on making the UK economy “bounce back”. However, they were some key announcements in regards to the fuel industry and red diesel usage plus more.
Fuel Duty rates frozen
As expected, the Chancellor’s 2021 budget has paused fuel duty, for the 11th consecutive year. This is designed to enable to support businesses during the pandemic.
Rather than increasing with inflation, fuel duty has been frozen for over a decade. This is a huge tax cut for motorists, costing the government over £10 billion per year in continuing the duty free freeze. Since 2011 Petrol and Diesel tax on sales has remained at 58ppl plus VAT.
It makes perfect sense to continue to free the fuel duty rates. As through Covid-19 the public heavily relied on their cars for a safer means of travel for essential journeys. This has outweighed the increasing pressure to lower carbon emissions. Raising the fuel duty could negatively affect the economy even more from increasing business costs.
Fuel duty rises are set to be considered within the Government’s plans to achieve “Net Zero” emissions by 2050.
UK Fuel prices on the rise
For the past four sequential months pump prices have led to an upsurge in cost. This is due to the rising prices for Barrel Oil. In February, oil rocketed by $10 per barrel to $65.83, a price not seen since January 2020. Currently, oil price is $67.11 per barrel, which has almost doubled since the start of November. Similarly, filling up an average tank in the UK currently more than £1.70 more expensive than the start of the month. Since the end of 2020, it has risen more than £5.
Red Diesel Reform
Motor and heating fuels are subject to fuel duty. However, because fuel duty was intended to be a tax on road vehicles, some fuels must be taxed at a lower, rebated, rate. Red Diesel is a non-road fuel that is exempt from fuel duty. You can identify Red Diesel as it contains a chemical, red dye to help fraudulent use.
At the Budget 2020 the Government announced that it will remove the entitlement to use Red Diesel for many sectors from April 2022. As a result, this will require industries to use fuel that’s taxed at the standard rate for DERV and therefore encourages businesses to use alternative fuels to help reduce emissions.
In the 2021 budget, the Government added more industries who are permitted to use Red Diesel. Therefore, from April 2022 the use of Red Diesel will be restricted to the following industries;
- Commercial boating industry, including fishing, passenger ferries & water freight industries
- Non-commercial power generation, such as hospitals and off-grid housing
- Agriculture, forestry, horticulture and fish farming
- Passenger, freight and maintenance vehicles that run on rail tracks
- Non-commercial heating – off the grid homes, places of worship & townhalls
- Travelling fun fairs and circuses
- Amateur sports club, including golf courses.
Penalties for breaking restrictions on the use of rebated fuels will also change, allowing HMRC to seize vehicles and other machinery in certain circumstances. Those who will lose their red diesel entitlement must not purchase red diesel for use form 1st April 2022 and run down their existing stock.
A big U-turn in the chancellor’s announcement was that sailors and boaters will continue to be permitted to use red diesel in their vessels after April 2022, a change in policy from Budget 2021.
Looking for more information on Red Diesel? Visit our FAQ’s page.
