Despite repeated calls from angry drivers, the government is still holding firm on plans to end the fuel duty freeze from September this year – which when combined with recent rocketing prices at the pumps could see 84p per litre tax bills for petrol drivers.
From September this year, the end of the fuel duty freeze is set to push prices at the pumps up by 5p a litre, and this change will take place just months after the war in Iran has seen prices spiral at filling stations.
A 5p cut in fuel duty previously put in place has already been extended again, but only until September 2026, when it is expected to be reversed through a ‘staggered approach’ gradually increasing the duty until March 2027.
The tax has been set at 57.95p since 2011, but the effective rate paid by drivers since 2022 has been 52.95p due to a “temporary” 5p cut that kept getting extended by successive governments.
It means drivers will be paying very nearly 58p a litre in fuel duty taxes on every litre of petrol they buy, not including the 20% VAT which is charged on the final price on top, once the fuel duty freeze ends.
Then, VAT is charged on top of the fuel duty, pushing the tax take per litre up to a dizzying 84p per litre based on today’s prices.
The RAC explains how it works: “The total retail price paid at the pump also includes a significant amount of tax – 57.95p per litre in fuel duty and 20% VAT.
“This means that over 60% of the price we pay at the pump goes direct to the Treasury, which together with car tax and ‘showroom’ tax totals more than £40bn a year.”
Fuel cost calculator DVANA shows how this works in practice. At current average petrol prices of 156.98p per litre according to the RAC’s latest petrol price comparison, drivers will, once the fuel duty freeze ends, be paying almost 58p in fuel duty and 26p in VAT for a total of 84p in tax charges per litre, with the other 73p going to the retailer.
Treasury minister James Murray defended the decision to remove the fuel duty freeze in Parliament at the end of April. He said: “We inherited plans from the previous government that would have seen fuel costs go up for people across the country.
“We have extended the 5p cut in fuel duty.
“We have extended the freeze, and that is an important way of helping people with the cost of living right now.”