UK Fuel Duty (2026)

Fuel duty is a tax charged on petrol, diesel, biodiesel and other motor fuels. It's a fixed amount per litre, regardless of the underlying oil price — so you pay the same duty tax whether oil is $50 or $150 per barrel.

The duty is charged when fuel is released from bonded storage (typically refineries or import terminals), before it reaches forecourts. On top of duty, VAT at 20% is also charged on the total price including the duty — so you're paying tax on tax.

Who pays fuel duty?

Ultimately, motorists pay fuel duty through pump prices. But technically it's paid by fuel suppliers (oil companies, importers) to HM Revenue & Customs when they release fuel from storage.

Revenue and spending

Fuel duty raises around £24 billion per year for the Treasury — about 3% of total government revenue. This money goes into general taxation, not specifically to transport spending, although the government often links fuel duty policy to transport and environmental objectives.

Why is duty increasing now?

The government has cited several reasons for ending the duty freeze:

• Net zero transition: Higher fuel costs encourage adoption of electric vehicles and reduce carbon emissions
• Fiscal sustainability: As EV adoption grows, fuel duty revenue will fall — the government needs to 'tax the transition'
• Road maintenance funding: Current fuel duty helps fund road maintenance; this needs to be maintained during the EV transition
• Economic recovery: Additional revenue to help balance public finances post-pandemic

The 'escalator' returns

From 2027 onwards, fuel duty will rise automatically with inflation plus 2% per year (the 'fuel duty escalator') unless Parliament votes otherwise. This was the default policy from 1993-2000, abandoned due to protests, and briefly reintroduced 2008-2011.

Electric vehicle exemption

Electric vehicles are exempt from fuel duty (obviously) but will face a new 'Electric Vehicle Excise Duty' (EVED) from April 2028. This will be charged at 3p per mile for business users initially, with a consumer rate to be announced.

Typical motorist (8,000 miles/year)

For someone driving 8,000 miles per year in a car averaging 40 MPG:

• Additional duty 2026-27: ~£36 per year
• Including VAT effect: ~£43 per year
• With inflation escalator: ~£55 extra per year by 2028

High-mileage drivers (25,000 miles/year)

For sales reps, delivery drivers and others doing high mileage:

• Additional duty 2026-27: ~£113 per year
• Including VAT effect: ~£135 per year
• With inflation escalator: ~£170 extra per year by 2028

Commercial vehicles

Haulage and logistics companies face proportionally higher costs due to lower fuel efficiency and higher mileage. The government has indicated that commercial vehicle operators will be eligible for enhanced capital allowances on electric vehicles to help offset duty increases.