Extension to the cut in fuel duty rates to March 2025
Published 6 March 2024
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Who is likely to be affected
Manufacturers, importers, distributors, retailers, household and business consumers of petrol, diesel and other fuel products that are subject to fuel duty.
General description of the measure
This measure extends the temporary cut in the rates of fuel duty introduced at Spring Statement in March 2022, and extended at Spring Budget in March 2023, for a further 12 months. The assumed inflation increase in fuel duty in 2024 to 2025 will not take place. Taken together this will maintain fuel duty rates at current levels for another year and represents a reduction of around 7 pence per litre (ppl) for main petrol and diesel rates in comparison to previous plans.
This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil of 5ppl, and the proportionate percentage cut (equivalent to 5ppl from the main fuel duty rate of 57.95ppl) in the rates for other fuels and rebated fuels, where practical. The current and previous fuel duty rates are shown in the following table:
Light oils
| Type | Rates prior to 23 March 2022 (£ per litre) | Continued cut rates (£ per litre) |
|---|---|---|
| Unleaded petrol | 0.5795 | 0.5295 |
| Light oil (other than unleaded petrol or aviation gasoline) | 0.6767 | 0.6267 |
| Aviation gasoline (Avgas) | 0.3820 | 0.3629 |
| Light oil delivered to an approved person for use as furnace fuel | 0.1070 | 0.0978 |
Heavy oils
| Type | Rates prior to 23 March 2022 (£ per litre) | Continued cut rates (£ per litre) |
|---|---|---|
| Heavy oil (diesel) | 0.5795 | 0.5295 |
| Marked gas oil | 0.1114 | 0.1018 |
| Fuel oil | 0.1070 | 0.0978 |
| Heavy oil other than fuel oil, gas oil or kerosene used as fuel | 0.1070 | 0.0978 |
| Kerosene to be used as fuel in an engine, other than in a road vehicle or for heating | 0.1114 | 0.1018 |
Biofuels
| Type | Rates prior to 23 March 2022 (£ per litre) | Continued cut rates (£ per litre) |
|---|---|---|
| Bioethanol | 0.5795 | 0.5295 |
| Biodiesel | 0.5795 | 0.5295 |
| Biodiesel for non road use | 0.1114 | 0.1018 |
| Biodiesel blended with gas oil not for road fuel use | 0.1114 | 0.1018 |
Road fuel gases
| Type | Rates prior to 23 March 2022 (£ per kg) | Continued cut rates (£ per kg) |
|---|---|---|
| Liquefied petroleum gas (LPG) | 0.3161 | 0.2888 |
| Road fuel natural gas including biogas | 0.2470 | 0.2257 |
Other fuel
| Type | Rates prior to 23 March 2022 (£ per litre) | Continued cut rates (£ per litre) |
|---|---|---|
| Aqua-methanol | 0.0790 | 0.0722 |
Policy objective
This measure is intended to maintain the rates of fuel duty at the reduced levels set on 23 March 2022 to support households and businesses.
This 5ppl cut will end on 22 March 2025 as part of the government’s commitment to fiscal responsibility and ensuring trust and confidence in our national finances.
Background to the measure
Fuel duty is payable on petrol, diesel and other liquid fuels used in vehicles, machinery, and for heating. It is also payable on gases used as fuel for road vehicles, but otherwise excludes gas, electricity and solid fuels such as coal which are subject instead to the climate change levy.
At Spring Statement 2022, the government announced that rates of fuel duty would be reduced for 12 months to support households and businesses at a time of high oil prices. This included cutting rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5ppl, with a proportionate percentage cut (equivalent to 5ppl from the main fuel duty rate of 57.95ppl) to the rates for other fuels and rebated fuels, where practical. This was extended for a further 12 months at Spring Budget 2023. This cut is currently legislated to end at the end of 22 March 2024.
Detailed proposal
Operative date
The change will have effect from 23 March 2024.
Current law
Fuel duty legislation is contained in the Hydrocarbon Oil Duties Act 1979 (HODA). The rates are set out in sections 6 to 8 and relevant rebates on those rates for certain fuels are set out in sections 11, 13AA, 13ZA, 14, 14A and 14B.
Proposed revisions
Secondary legislation will be introduced to adjust the liability to duties in sections 6 to 8 and the rebates in sections 11, 13AA, 13ZA, 14,14A and 14B of HODA.
Summary of impacts
Exchequer impact (£million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| -45 | -3,090 | -820 | -830 | -835 | -840 |
These figures are set out in Table 5.1 of Spring Budget 2024 and have been certified by the Office for Budget Responsibility (OBR). More details can be found in the policy costings document published alongside Spring Budget 2024.
Economic impact
The measure will have a direct effect on Consumer Price Index (CPI). In their March 2024 Economic and Fiscal Outlook (EFO) the OBR estimate that fuel duty reduces CPI inflation by 0.2 percentage points in 2024 to 2025 and adds 0.1 percentage points to CPI inflation in 2025 to 2026 as the freeze unwinds.
Impact on individuals, households and families
This measure will have a positive overall impact on up to an estimated 36 million individuals by maintaining motoring costs, subject to how much they drive. This measure is not expected to have an impact on family formation, stability or breakdown. Customer experience is expected to remain broadly the same, as the extension of the cut in fuel duty does not change any processes or tax administration obligations for individuals.
Equalities impacts
It is not expected that there will be adverse effects on any group sharing protected characteristics.
Impact on business including civil society organisations
This measure will benefit businesses and civil society organisations where fuel is part of ongoing running costs.
The measure is expected to have a negligible administrative impact on businesses and civil society organisations distributing, supplying and using fuel types subject to fuel duty. One-off costs could include familiarisation with the extension on the fuel duty rate freeze. There are not expected to be any continuing costs.
Customer experience is expected to remain broadly the same for businesses and civil society organisations as the change does not affect how businesses interact with HMRC.
Operational impact (£million) (HMRC or other)
HMRC will not incur any costs implementing this decision.
Other impacts
This measure is being brought forward to continue to provide support to households and businesses, which will likely maintain any marginal impact of carbon emissions from increased consumption of fossil fuels that this measure may cause.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be monitored through information collected from tax receipts. Continued collaboration with Department for Transport will also allow monitoring of traffic levels and emissions.
Further advice
If you have any questions about this change, contact Neil Mills at [email protected].