Sylvie Willis
Fuel duties are levied on purchases of petrol, diesel, and other fuels, and they represent a significant source of revenue for the UK government. In 2023/24, fuel duty tax receipts in the UK amounted to approximately £24.83 billion. The main rate of fuel duty has been frozen since 2011 and was temporarily reduced by 5 pence per litre in 2022/23. This temporary cut was extended to subsequent years, including 2025/26. The rise in electric vehicles (EVs) is expected to impact the government's tax revenue from fuel duties, as EVs are exempt from fuel duty and road tax. According to estimates, the sale of new petrol and diesel vehicles is expected to end between 2030 and 2035, which will further affect the revenue generated from fuel duties.
| Characteristics | Values |
|---|---|
| Fuel duty tax receipts in the UK in 2023/24 | £24.83 billion |
| Expected fuel duty tax receipts in the UK in 2025/26 | £24.4 billion |
| Percentage of total receipts | 2.0% |
| Equivalent amount per household | £850 |
| Percentage of national income | 0.8% |
| Rate per unit of fuel purchased | 52.95 pence per litre for standard petrol and diesel |
| Rate on marked gas oil | 10.18 pence per litre |
| Annual revenue from petrol and diesel cars | £35 billion |
| Annual revenue from fuel duty | £28 billion |
| Annual revenue from Vehicle Excise Duty (road tax) | £7 billion |
| Percentage of UK's GDP | 1.5% |
| Percentage of all tax revenue | 4% |
| Fuel duty rate for 2025/26 | Frozen |
Explore related products
What You'll Learn
- Fuel duty is included in the price paid for petrol, diesel and other fuels
- The rate of duty depends on the type of fuel
- Fuel duty is a significant source of revenue for the UK government
- The rise of electric vehicles will impact the government's tax take
- The government has reduced and frozen fuel duty rates
Fuel duty is included in the price paid for petrol, diesel and other fuels
Fuel duty is levied on the purchase of petrol, diesel, and a variety of other fuels. It is included in the price paid for petrol, diesel, and other fuels used in vehicles or for heating. The rate of duty depends on the type of fuel being purchased and is levied per unit of fuel. For instance, the rate for standard petrol and diesel is 52.95 pence per litre, while the rate for marked gas oil is 10.18 pence per litre. Excise duty is charged on most hydrocarbon oils, with the two main categories of road fuel—unleaded petrol and diesel—being subjected to duty at 52.95 pence per litre.
The UK government collects significant revenue from fuel duties. In 2022-23, fuel duties were estimated to raise £26.2 billion. In 2023-24, this figure was expected to be around £24.7 billion, representing 2.2% of all receipts and equivalent to £850 per household and 0.9% of national income. The Autumn Budget 2024 included a planned rise in fuel duty rates for April 2025, but this was cancelled, and a temporary 5p reduction was extended for another 12 months.
Fuel duty rates have been a topic of discussion for successive governments. The Labour Government in 1999 suspended the duty escalator, and in the following decade, it increased road fuel duties sporadically. The Coalition Government that came into power in 2010 reversed this approach by cutting duty rates by 1p per litre in 2011 and then freezing rates for the next four years. The Conservative Government continued this freeze from 2015 to 2021.
The Office for Budget Responsibility (OBR) has estimated that the cumulative cost of freezing fuel duty rates between 2010/11 and 2021/22 was around £65 billion. The OBR's fuel clearances forecast involves forecasting the total distances travelled, using an econometric model that relates distances travelled to domestic consumption and real GDP. This helps in understanding the demand for road travel and, consequently, the demand for fuel in the economy.
Tire Choice: Impacting Fuel Efficiency and Performance
You may want to see also
Explore related products
The rate of duty depends on the type of fuel
Fuel duties are levied on purchases of petrol, diesel, and a variety of other fuels. The rate of duty depends on the type of fuel being purchased. The duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel, and other fuels used in vehicles or for heating.
The headline rate for standard petrol and diesel is 52.95 pence per litre. This rate has been frozen since 2011-12 and includes a temporary 5 pence cut introduced in 2022-23, which has been extended until 2025-26. This rate also applies to biodiesel and bioethanol. The rate for marked gas oil, which is mostly used for off-road diesel in agriculture, rail, and non-commercial heating, is 10.18 pence per litre. The rate for liquefied petroleum gas is 28.88 pence per kilogram, while the rate for natural gas used as fuel in vehicles, such as biogas, is 22.57 pence per kilogram. The rate for 'fuel oil', which is burned in a furnace or used for heating, is 9.78 pence per litre.
The UK government's fuel duty tax receipts have also varied over the years. In 2023/24, they amounted to approximately £24.83 billion, compared to £25.1 billion in the previous financial year. For 2025-26, fuel duties are expected to raise £24.4 billion, representing 2.0% of all receipts and equivalent to £850 per household and 0.8% of national income.
The True Cost of DEF Fuel
You may want to see also
Explore related products
Fuel duty is a significant source of revenue for the UK government
In 2023/24, fuel duty tax receipts in the UK amounted to approximately £24.83 billion, a slight decrease from the previous year's £25.1 billion. Fuel duty is expected to bring in £24.4 billion in 2025/26, representing 2.0% of all receipts and equivalent to £850 per household and 0.8% of national income.
The UK government also receives tax revenue from Vehicle Excise Duty (road tax), which, combined with fuel duty, makes up about 1.5% of the UK's GDP and 4% of all tax revenue. However, the rise in electric vehicles (EVs) is expected to reduce the government's tax take from cars, as EVs are exempt from road tax and do not incur fuel duty.
The UK government is facing the challenge of replacing the significant revenue stream from fuel duty and road tax as the country transitions to electric vehicles. Various groups have advised the government on potential solutions, including the introduction of road pricing based on telematics, whereby drivers are charged based on how much, when, and where they drive.
The Cost of Fuel for SpaceX Launches
You may want to see also
Explore related products
The rise of electric vehicles will impact the government's tax take
Fuel duties are a significant source of revenue for the UK government. Fuel duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel, and other fuels used in vehicles or for heating. The rate depends on the type of fuel, with the headline rate on standard petrol and diesel being 52.95 pence per litre. In 2023/24, fuel duty tax receipts in the United Kingdom amounted to approximately £24.83 billion. This represents a significant contribution to the government's overall tax take.
However, the rise of electric vehicles (EVs) could impact the government's tax revenue from fuel duties. As more people adopt EVs, the demand for petrol and diesel will decrease, resulting in a decline in fuel duty receipts. This trend is already being observed, with the UK government reporting weaker fuel duty receipts in 2020-21 due to the coronavirus outbreak and the resulting decline in travel.
The shift towards EVs is likely to accelerate in the coming years, particularly with the recent end of federal tax incentives for EVs in the UK. Previously, buyers of new EVs were eligible for a $7,500 federal tax credit, while used EVs included a credit of up to $4,000. These incentives were designed to make EVs more affordable and reduce the financial barrier to adopting more environmentally friendly transportation.
While the removal of these incentives may slow down the transition to EVs, it is unlikely to stop it altogether. EVs are generally cheaper to maintain and fuel than traditional gas-powered cars, even without the tax credits. Additionally, the increasing demand for electricity and the rise of clean energy projects may drive up electricity prices, making EVs even more cost-competitive with traditional fuel vehicles.
Overall, the rise of electric vehicles is likely to impact the government's tax take from fuel duties. As the demand for petrol and diesel decreases, the government will need to find alternative sources of revenue to maintain their current level of tax receipts. This may involve introducing new taxes or adjusting existing ones to account for the changing transportation landscape.
Chevron Fuel System Cleaner: How Much to Use?
You may want to see also
Explore related products
![Petrol [DVD]](https://m.media-amazon.com/images/I/61SX5XDoCgL._AC_UL320_.jpg)
The government has reduced and frozen fuel duty rates
Fuel duties are a significant source of revenue for the UK government, with fuel duty tax receipts totalling around £24.83 billion in 2023/24. The main rate of fuel duty has been frozen since 2011 and was temporarily reduced by 5 pence per litre in 2022-23. This temporary cut was extended to 2023-24, 2024-25 and 2025-26.
The decision to freeze and reduce fuel duty rates has been criticised as economically inefficient and environmentally damaging. It is estimated that the freeze and cut in fuel duty will cost the government over £20 billion and will primarily benefit wealthier motorists, as they tend to drive less fuel-efficient cars. The Social Market Foundation estimates that the richest households will save £60, while the poorest will only save £22.
The New Economics Foundation conducted an analysis that found that the likely increase in household fuel consumption due to the freeze will result in an additional 3.4 to 3.9 million tonnes of carbon dioxide emissions. They also found that of the £3.4 billion in fuel duty savings that households will make, £2.2 billion will go to the top 50% of households by income, while only £1.2 billion will go to the bottom 50%.
The government has stated that the temporary cut in fuel duty rates is intended to support households and businesses at a time of high oil prices. The cut is expected to have a positive impact on individuals by maintaining motoring costs and may also benefit businesses by reducing prices. However, critics argue that the government has cut investment in walking and cycling infrastructure and allowed public transport prices to rise, making it more difficult for people to reduce their carbon emissions.
Airlines' Expenses: Jet Fuel Cost Insights
You may want to see also
Frequently asked questions
The UK government makes billions of pounds from fuel duty. The exact amount varies from year to year, with £25.1 billion in 2022/23, £24.83 billion in 2023/24, and an expected £24.4 billion in 2025/26.
Fuel duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel, and other fuels used in vehicles or for heating. The rate depends on the type of fuel, with the headline rate on standard petrol and diesel being 52.95 pence per litre, although this rate has been temporarily reduced by 5 pence per litre since 2022/23.
Fuel duties represent a significant source of revenue for the UK government, contributing an expected 2.0% of all receipts in 2025/26, or £850 per household. Combined with Vehicle Excise Duty (road tax), these sources make up 1.5% of the UK's GDP and account for around 4% of all tax revenue.
The transition to electric vehicles (EVs) will have a significant impact on fuel duty revenue, as EVs are exempt from paying fuel duty and road tax. As the sale of new petrol and diesel vehicles is banned between 2030 and 2035, the UK government will need to find alternative sources of revenue to replace the estimated £35 billion contributed annually by drivers of petrol and diesel cars.
