Fuel duty increase: How this could impact businesses

 

The Potential Impact of a Fuel Duty Increase

At Ward Williams Accountancy, we are closely monitoring the discussions surrounding a potential 10p increase in fuel duty and its implications for businesses and individuals. Here’s our analysis of the recent commentary on this issue.

 

Addressing the Budget Deficit

The government is contemplating a 10p rise in fuel duty as a means to help address the reported £22 billion black hole in public finances. This proposed increase could generate an estimated £5.5 billion in additional revenue for the Treasury.

Key Points to Consider:

• Current Situation: Fuel duty has remained unchanged at 57.95p per litre since March 2011, following a temporary reduction of 5p implemented in March 2022 to alleviate the cost of living crisis.
• Proposed Change: A 10p increase would effectively reverse the temporary cut and introduce an additional 5p, potentially raising £5.5 billion annually for the government.
• Impact on Drivers: This increase would add approximately £6.60 to the cost of every 55 litres of fuel purchased. While this may not seem substantial on an individual basis, for those who spend their working days on the road, these costs can accumulate quickly.

Broader Economic Context

While the proposed fuel duty increase could provide a significant boost to government revenues, it is essential to consider the wider economic implications:

• Business Costs: Companies that rely heavily on transportation may face increased operational expenses, which could affect their profitability.
• Inflation Concerns: Higher fuel prices could contribute to inflationary pressures across various sectors, impacting consumers and businesses alike.
• Electric Vehicle Transition: The increasing adoption of electric vehicles is already affecting fuel duty revenue, highlighting the need for long-term fiscal planning.

Exploring Alternative Revenue Sources

In addition to the fuel duty increase, the government is exploring various options to address the budget shortfall, including potential changes to inheritance tax (IHT) and capital gains tax (CGT).

 

Our Perspective

As accountants, we advise our clients to stay informed about these potential changes and to consider how they might impact their financial planning and business operations. While the fuel duty increase could be a straightforward solution to boost revenue, it is crucial to weigh the economic impact against the fiscal benefits.

 

We will continue to monitor developments closely and provide updates as the budget announcement on 30th October approaches. Businesses and individuals should be prepared for potential changes and consider how they might adjust their financial strategies accordingly.