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2016 Budget - What it Means for Motorists

The 2016 budget was announced yesterday by the Chancellor, George Osborne. As a driver, how did this affect you? Read on for the summary of announcements which will impact road users.

Fuel duty. Despite many experts warning it would increase, fuel duty is to be frozen for the sixth consecutive year. Currently, petrol, diesel, biodiesel and bioethanol are taxed at 57.95 pence per litre; this accounts for around half of the price of petrol and diesel that you pay at the pump. Falling oil prices means that a litre costs around £1 now, versus £1.40 12 months ago.

"We froze fuel duty throughout the last Parliament – a tax cut worth nearly £7 billion a year. In the last twelve months, petrol prices have plummeted. That is why we pencilled in an inflation rise. But I know that fuel costs still make up a significant part of household budgets and weigh heavily on small firms. Families paid the cost when oil prices rocketed; they shouldn’t be penalised when oil prices fall," Mr Osborne said.

The move is expected to save drivers up to £75 per year.

Insurance Premium Tax (IPT). Millions will pay more for their insurance after the IPT was increased by 0.5 percent. The rise from 9.5% to 10%, is less than the 3 percentage point hike that had been expected. However it follows an increase from 6.5% to 9.5% last November and is likely to mean a further rise in the cost of all insurance.

Coming into effect October 1st this year, The Association of British Insurers (ABI) has warned that the changes will impact over 26 million drivers and 20 million households. The funds are to be directed towards building flood defences across the North of England.

Driverless Cars. To be tested on UK motorways from 2017, the trial due to take place on a "strategic road network" will start as soon as next year. Funding will come from the governments Intelligent Mobility Fund which has a budget of £100 million to invest in a range of innovations involving transport.

The first autonomous cars are due to run in London this summer. Located at Greenwich Penninsulam the ‘pods’ will service local residential areas and the O2 arena.

Pothole Fund. The Chancellor announced an action fund to tackle potholes in England during 2016-2017, allowing councils to fill as many as one million holes. A further £130 million was announced to fix roads and bridges damaged by storms which hit in December 2015.

At-a-glance motoring impacts announced in the 2016 Budget

  • Fuel duty frozen for sixth year consecutive year
  • Insurance premium tax to rise by 0.5% to fund for extra flood defences
  • Trials of driverless cars to take place in 2017
  • New tunnel road planned under Pennines from Sheffield to Manchester
  • £161m investment to expand M62 to four lanes
  • £75m upgrades to A66 and A69 northern arteries
  • Tolls on the Severn crossing from England to Wales halved by 2018
  • £50m Pothole Action Fund for 2016-17
  • £130m repair fund for roads/bridges damaged by recent storms
  • Company car tax to continue being based on CO2 beyond 2021
  • Businesses encouraged to buy low-emissions cars, with 100% First Year Allowance (FYA) extended for a further three years to April 2021


  • By Tracey McBain