Fuel duty: Developments since 2022

Fuel duty is an excise tax charged at a monetary value per litre of fuel. It varies according to the type of fuel (the most common of which are petrol and diesel).

This briefing discusses the current fuel duty policy, starting from the 5p reduction implemented by the Conservative government in 2022. The Library briefing Taxation of road fuels (2008 to 2022) has more detail on the previous period.

Fuel duty revenue

In 2025/26, fuel duties raised just under £25 billion, representing 0.8% of gross domestic product (GDP). By comparison, income tax (the tax with the highest revenue in the UK) raised almost £332 billion, equivalent to 10.8% of GDP.

Current fuel duty rates

Fuel duty is charged at 52.95 pence per litre for petrol and diesel. The rate was decreased by 5p per litre by the Conservative government in March 2022. There has been no increase in the fuel duty rates of unleaded petrol and diesel since 2011.

When do fuel duty rates increase?

The government’s stated policy is that fuel duties should increase each year in line with Retail Price Index (RPI) inflation (PDF). This is not set in legislation and is not an automatic mechanism. So, the government has to introduce legislation each year to increase fuel duties.

In practice, this has not happened since 2011. Though it remains government policy to increase fuel duties each year, in effect successive governments have cancelled each of the planned rises for the past 15 years. The most recent change, enacted in 2022, was the 5p reduction in fuel duties.

The 5p reduction and following developments

As a result of Russia’s invasion of Ukraine, launched in February 2022, fuel prices strongly rose. This led to speculation that the government would cut fuel duty rates to counter this increase. The then Chancellor, Rishi Sunak, announced a 5p reduction in fuel duties at Spring Statement 2022. The reduction was supposed to last 12 months, with a cost to the government of £2.4 billion. Effectively, the government planned to recoup this the following year by reversing the 5p cut and implementing an inflation-linked increase. Commentators, such as the Institute for Fiscal Studies’ Paul Johnson and the Institute for Government’s Dr Gemma Tetlow expressed scepticism that this was going to happen.

The Conservative government chose to not reverse the 5p reduction and maintain the freeze at Spring Budget 2023 and Spring Budget 2024. At Autumn Budget 2024, the Labour government did the same, extending the freeze to April 2026.

Latest developments

At Budget 2025, the government further extended the freeze (including the temporary 5p cut) to the end of August 2026. The government also set out a plan to gradually withdraw the 5p reduction between September 2026 and March 2027, and to then uprate fuel duties in line with RPI inflation from April 2027.

However, due to the escalation of military action in the Middle East, and subsequent increases in fuel prices, there have been calls for the planned increases to fuel duty to be cancelled. In May 2026, the government said that the freeze would be extended until the end of 2026. The statutory instrument to effect this extension would increase fuel duty rates by 3p per litre from 1 January 2027. A few days after the announcement the government published an impact assessment to reflect its decision to extend the freeze. The government still plans to have withdrawn the full 5p temporary reduction by 1 March 2027.

Policy discussion on the freeze Effects on the public finances

Maintaining fuel duty rates frozen has consequences for the public finances because the government is receiving less money than it otherwise would have had. The OBR has recently calculated that freezing fuel duty rates has cost the government around £120 billion between 2011 and October 2024.

It also has an effect on fiscal forecasting. Because government policy continues to be that fuel duties will increase year-on-year, forecasting by the Office for Budget Responsibility assumes that this will be the case. The OBR has highlighted the routine process of cancelling planned fuel duty rises has created a “significant risk to the forecast.”

Effects on households, businesses, and the environment

Analysis by the think tank Resolution Foundation (PDF) showed that maintaining or cutting fuel duty rates benefitted wealthier sections of the populations more. At the time of the 5p cut in 2022, an editorial in the Times also argued this, saying that “those on lower incomes are less likely to drive a car.”

Nevertheless, not increasing fuel duties inevitably represents a saving for households. There have been arguments, for example by the RAC Foundation, that such a policy would benefit the economy as a whole, rather than just drivers. There is no universal agreement on this, with some (such as the New Economics Foundation) suggesting that potential savings to businesses would not be passed down to consumers.

There is broad consensus that not increasing the rates in line with inflation has led to a relative increase in carbon emissions. For example, in 2023 the publication Carbon Brief argued that emissions were 7% higher than they would have been had fuel duties increased in line with inflation.

Effect on the electric vehicle market

Some vehicle manufacturers have expressed concern that the continuation of the fuel duty freeze has not been implemented alongside policies to support the uptake of zero emission vehicles. For example, after Autumn Budget 2024, the Society for Motor Manufacturers and Traders (SMMT) said that it was disappointing that no measures were introduced to support the market for electric vehicles.

Views in Parliament

There has been little criticism from MPs when successive governments have frozen (or cut) fuel duty rates. Not increasing fuel duties has been the policy of both major parties (Labour and Conservative). Some criticism has been expressed by the Treasury Select Committee in the previous Parliament, on the grounds that it undermined the credibility of the fiscal forecasts. The current Chair of the Transport Committee, Ruth Cadbury (Labour), has voiced a concern that declining fuel duty revenues represented a risk to the public finances, and that the government had to address this issue.