Fuel duty is a flat tax the UK government charges on every litre of petrol, diesel, and most other motor and heating fuels. In 2026, the rate on standard unleaded petrol and diesel is 52.95 pence per litre, and it sits inside the pump price alongside VAT. The tax raises around £24 billion a year, putting it among the government’s largest revenue sources after income tax, National Insurance, and VAT.
How the Tax Works
Fuel duty is a fixed pence-per-litre charge, not a percentage. Whether crude oil trades at £50 or £100 a barrel, the duty portion of the price does not move. That is why pump prices rarely fall as far as oil price headlines suggest: only the product cost shrinks, while the duty stays put.
The tax is collected upstream, at the point of production or import, rather than at the forecourt. Refiners and fuel importers pay HMRC before the fuel enters distribution, then the cost passes through wholesalers and retailers to the driver. Collecting from a small number of producers keeps compliance high and enforcement manageable.
Current Fuel Duty Rates for 2026
The statutory baseline under the Hydrocarbon Oil Duties Act 1979 is 57.95 pence per litre for unleaded petrol and diesel, but a temporary 5p cut first introduced in March 2022 has been extended and remains in effect through 31 December 2026. That gives an effective rate of 52.95 pence per litre.1GOV.UK. Amended Fuel Duty Rates 2026 to 20272legislation.gov.uk. Hydrocarbon Oil Duties Act 1979
Different fuel types carry different rates. The main ones for 2026 are:
- Unleaded petrol and diesel: 52.95 pence per litre
- Biodiesel and bioethanol: 52.95 pence per litre
- Marked gas oil (red diesel): 6.48 pence per litre from 15 June 2026
- Liquefied petroleum gas (LPG): 28.88 pence per kilogram
- Natural road fuel gas, including biogas: 22.57 pence per kilogram
- Aviation gasoline: 36.29 pence per litre
- Fuel oil and kerosene for heating: 9.78 pence per litre
The legislative default is for rates to return to their pre-cut levels from 1 January 2027, though final rates will be confirmed at Budget 2026.1GOV.UK. Amended Fuel Duty Rates 2026 to 2027
The Long Freeze and the 5p Cut
Planned increases to fuel duty have been postponed for 16 consecutive years, so the rate has not risen with inflation since 2010-11. Combined with the temporary 5p cut, drivers pay substantially less in real terms than the originally scheduled rates would deliver. Raising a tax that appears immediately on forecourt price boards has proved politically difficult, and the freeze has become one of the longer-running policy commitments of its kind.
What You Actually Pay at the Pump
Two taxes are built into every litre. Fuel duty is embedded at 52.95 pence, and then VAT at 20 percent is charged on the whole retail price, including the duty itself. That layering adds roughly 10.59 pence per litre in VAT applied to the duty portion alone.3Office for Budget Responsibility. Fuel Duties
A worked example: if the pre-tax cost of a litre of petrol is 60p, the pump price is roughly 60p (product) + 52.95p (duty) + 22.59p (VAT at 20% on the combined £1.1295), landing around £1.36 per litre. Well over half is tax.
Domestic heating fuel is treated more gently. Heating oil and kerosene carry a duty of 9.78 pence per litre and are subject to VAT at the reduced 5 percent rate rather than 20 percent.4GOV.UK. Tax on Shopping and Services – Fuel Duty
Which Fuels Are Covered
Fuel duty applies broadly. Standard road fuels make up the bulk of receipts, but the tax also covers biodiesel, bioethanol, LPG, natural gas used as road fuel, and aviation gasoline. Non-road fuels are not exempt either: heating oil, fuel oil for furnaces, and kerosene all attract duty at reduced rates.4GOV.UK. Tax on Shopping and Services – Fuel Duty
Red Diesel and Rebated Fuel
Some fuels carry a much lower duty because they are meant for specific off-road or non-commercial uses. Red diesel, or marked gas oil, is the best-known example. It is dyed red and treated with chemical markers so HMRC officers can identify it in a fuel tank. The rebated rate is 6.48 pence per litre from 15 June 2026, against 52.95 pence for standard road diesel.1GOV.UK. Amended Fuel Duty Rates 2026 to 2027
Who Can Still Use Red Diesel
The rules changed in April 2022. The government removed entitlement from most sectors, leaving only a limited list of qualifying uses:5GOV.UK. Changes to Rebated Diesel and Biofuels From 1 April 2022
- Agriculture, horticulture, forestry, and fish farming
- Rail passenger, freight, and maintenance vehicles
- Non-commercial heating in homes, hospitals, places of worship, and similar premises
- Golf courses and community amateur sports clubs, for ground maintenance and clubhouse heating and lighting
- Marine craft refuelling and operating in the UK, except private pleasure craft in Northern Ireland
- Travelling fairs and circuses
Construction, manufacturing, warehousing, and many other sectors that previously ran on red diesel now pay the full road-fuel rate.
Penalties for Misusing Red Diesel
HMRC officers can stop vehicles and take fuel samples. If they find rebated fuel in a road vehicle or other ineligible machine, they will seize it on the spot. HMRC may offer to return the vehicle for a fee and on whatever conditions they set, but there is no automatic right to have it back.6HM Revenue & Customs. Using Rebated Fuels in Vehicles and Machines (Excise Notice 75)
Beyond seizure, you face a financial penalty under the Finance Act 1994. HMRC can recover the duty avoided going back up to four years and apply a wrongdoing penalty based on the scale of illegal use. Serious cases, especially those involving repeat offending or dishonesty, can lead to criminal prosecution, with an unlimited fine, up to seven years in prison, or both.6HM Revenue & Customs. Using Rebated Fuels in Vehicles and Machines (Excise Notice 75)
Refusing to let an officer take a sample is itself an offence. If you cannot or will not remove an anti-theft device so a sample can be drawn, HMRC can seize the vehicle until they get one. Removing the red dye or masking the chemical marker are separate offences carrying the same penalties.
Relief for Bus Operators
Local bus operators can claim the Bus Service Operators Grant (BSOG), a discretionary payment based on the fuel each operator uses. It offsets a share of the duty paid on diesel used in local services and also contributes toward the costs of low-carbon vehicles and updated ticketing equipment.7GOV.UK. Bus Service Operators Grant – Commercial Transport Operators Many rural and low-traffic routes would not be financially viable without it.