Fuel duty cut by 5p - How much will I save?

According to government figures, it is expected that this cut, together with the fuel duty freeze in 2022-23 (i.e. not increasing the fuel duty for 2022-23), should result in the following savings over the next 12 months: 

• £100 for the average car driver, 
• £200 for the average van driver, 
• £1,500 for the average haulier. 

The current rate of fuel duty for unleaded petrol is currently £0.5795 per litre and will reduce to £0.5295 per litre.   

As a guide, the 5p per litre cut represents a saving of £1.50 for every 30 litres (approximately £50 spent at current prices) of fuel.  As one would expect, and the figures above indicate, the reduction in fuel duty is likely to affect hauliers and businesses that have significant fuel use, far more than the average motorist.

This may help hauliers and other businesses through a reduction in transport costs, and if the benefit is passed to consumers the increase in prices of foods and other consumer goods may be slightly less than it would otherwise have been.

VAT on energy-saving materials 

From April 2022 VAT will be reduced from 5% to zero on certain energy saving materials, including solar panels, heating pumps and roof insulation in residential accommodation.  This is likely to affect businesses that install energy saving materials (ESMs) and customers who have ESMs installed in England, Scotland and Wales.  The rate of VAT due on installations will remain unchanged. 

The zero rate will apply for 5 years, until 31 March 2027, and will then revert to the 5% rate.  

Under current law, the reduced rate of VAT can apply to the installation of ESMs in residential accommodation when certain “social policy conditions” are satisfied (supplies to persons aged 60 or over or in receipt of certain benefits, housing associations or installations in accommodation used solely for a relevant residential purpose) or, where the cost of the ESM does not exceed 60% of the total value of the supply (“the 60% test”).    

Following the changes, the relief will no longer be restricted by the social policy conditions or the 60% test.  This should positively affect businesses that install ESMs as they will no longer need to assess whether the social policy conditions are met or, calculate whether the installation qualifies for the relief.  However, they should still be able to recover input VAT. 

If these savings are passed on to customers it may help to increase demand for the installation of ESMs.