{{short description|Fuel tax imposed on road motor vehicles in UK}} {{update|date=October 2021}} {{Use dmy dates|date=June 2017}} {{Use British English|date=June 2017}} thumb|UK filling stations collected more than £27 billion in fuel duty in 2014–15. '''Hydrocarbon Oil Duty''' (also '''fuel duty''' and '''fuel tax''') is a fuel tax levied on some fuels used by most road motor vehicles in the United Kingdom; with exceptions for local bus services, some farm and construction vehicles and aviation, which pay reduced or no fuel duty.
The government revenue from fuel duty was £27.1 billion for the financial year 2014–2015.{{citation needed|date=February 2018}} This is an increase in cash terms in comparison to 2013-2014 but now only represents 1.5% of GDP. This is in contrast to the start of the 2000s when it was 2.3% of GDP. A further £3.9 billion is raised from the VAT on the duty, contributing some 3.5 per cent of total UK tax revenues.<ref>{{cite report |title=United Kingdom National Accounts: The Blue Book |year=2010 |publisher=Office for National Statistics}}</ref> The Fuel Price Escalator, which was introduced in 1993 was abandoned after the disruptive fuel tax protests of 2000.
==History== The Finance Act 1910 (the so-called People's Budget) introduced a petrol duty in the UK for the first time. From April 1909 the rate was set at 3d (£0.013) per UK gallon, bringing the price of a typical UK gallon to 1s 1½d ({{Inflation|UK|0.065|1908|r=2|fmt=eq|cursign=£}}).{{Inflation-fn|UK|df=y}}<ref name="FA2010">{{Cite web|url=https://www.legislation.gov.uk/ukpga/Edw7and1Geo5/10/8/enacted|title=Finance (1909-10) Act 1910}}</ref><ref name="politicescouk">{{cite web|url=https://www.politics.co.uk/reference/fuel-duties/|title=Fuel duty|publisher=Politics.co.uk}}</ref>
It was then abolished by the Finance Act 1919 after several years of steady petrol price rises and replaced by vehicle taxation, and the tax disc based on horsepower, after which the cost of petrol was about 4s{{citation needed|date=July 2012}} ({{Inflation|UK|0.2|1919|r=2|fmt=eq|cursign=£}}){{Inflation-fn|UK|df=y}} per UK gallon.
In 1928, following market reductions in the cost of a UK gallon of fuel to about 1s 2½d ({{Inflation|UK|0.0604|1928|r=2|fmt=eq|cursign=£}}),{{Inflation-fn|UK|df=y}} the Government introduced a tax of 4d (£0.017) per UK gallon<ref name=politicescouk/> bringing the cost of a UK gallon of petrol to 1s 6¾d{{citation needed|date=July 2012}} ({{Inflation|UK|0.078|1928|r=2|fmt=eq|cursign=£}}).{{Inflation-fn|UK|df=y}}
In the 1993 Budget during the Major ministry, Norman Lamont introduced a 10p rise and also a Fuel Price Escalator whereby the cost of fuel would be increased annually by 3 per cent above inflation in future years; the Petroleum Revenue Tax was reduced in the same budget and later abolished. Kenneth Clarke, the new chancellor, increased the escalator to 5p in November of that year. These increases were introduced at a time of considerable change in government transport policy, and followed major UK road protests, including the M11 link road protest and the protest at Twyford Down.<ref>{{cite web|url=https://www.independent.co.uk/news/gummer-denies-the-great-car-economy-1430379.html|title=Gummer denies the 'great car economy'|work=The Independent|date=1994-03-20}}</ref> The escalator was increased in 6p per year in 1997 by Gordon Brown, chancellor for the new Blair ministry.
The escalator was effectively cancelled by the Brown ministry follow severe disruption caused by the fuel tax protests in 2000. Since that time more cautious increases have been applied.<ref name=politicescouk/> A planned 3.02p/litre rise which was confirmed by the 2012 United Kingdom budget to come into effect on 1 August 2012<ref>{{cite news|url=https://www.bbc.co.uk/news/business-17458423|title=Budget 2012: Fuel duty increase gets go-ahead|work=BBC News|date=21 March 2012}}</ref> was later deferred until 1 January 2013 at short notice. The last increase in Fuel duty occurred in 2010. A decrease then occurred in 2022.
==Rates and receipts== The rates since 23 March 2022 have been as follows:
{|class="wikitable" |- !scope="col" | Fuel !scope="col" | Rate !scope="col" | Notes |- |Petrol, diesel, biodiesel, bioethanol||£0.5295<ref name=hmrc>{{cite web|url=http://www.hmrc.gov.uk/budget2011/tiin6330.pdf |title=Hydrocarbon Oils: Duty Rates |publisher=HMRC |url-status=dead |archive-url=https://web.archive.org/web/20110523135710/http://www.hmrc.gov.uk/budget2011/tiin6330.pdf |archive-date=2011-05-23 }}</ref>||per litre |- |Natural gas used as road fuel (inc biogas)||£0.2257<ref name="hmrc"/>||per kg |- |Road fuel gas other than natural gas||£0.2888<ref name=hmrc/>||per kg |- |}
VAT at the current rate is then added to the total price.<ref>{{Cite news |title=Fury as fuel duty lifted 2p to offset VAT cut |date=2008-11-24 |publisher=Times Newspapers |url=http://business.timesonline.co.uk/tol/business/economics/pbr/article5225998.ece |archive-url=https://web.archive.org/web/20110612123007/http://business.timesonline.co.uk/tol/business/economics/pbr/article5225998.ece |url-status=dead |archive-date=12 June 2011 |access-date=2009-04-03 | location=London | first=Marcus | last=Leroux}}</ref> The taxation percentage of forecourt prices varies according to the price of oil, rising from 55.9% at 65p per litre untaxed to 61.4% at 50p per litre (2012 figures).
==European comparisons== The UK average petrol price as of April 2025 is £1.37 per litre.<ref>{{Cite web |date=2025-04-16 |title=UK inflation falls as price of petrol drops |url=https://www.bbc.co.uk/news/articles/c4g2eyp79y3o |access-date=2025-05-14 |website=BBC News |language=en-GB}}</ref> As of May 2025, prices in the EU vary greatly from country to country. Denmark pays the most at £1.65 and Bulgaria pays the least at £1.01. Petrol prices in the UK are slightly lower than similar European countries such as France and Germany, with £1.44 and £1.47 per litre respectively.<ref name=":1">{{Cite web |title=European fuel prices – Petrol and diesel prices in Europe {{!}} RAC Drive |url=https://www.rac.co.uk/drive/travel/advice/european-fuel-prices-petrol-and-diesel-prices-in-europe/ |access-date=2025-05-14 |website=www.rac.co.uk |language=en}}</ref>
Diesel in the UK costs, on average, £1.40 per litre as of May 2025.<ref>{{Cite web |title=Fuel prices drop but drivers are still paying too much for petrol and diesel {{!}} RAC Drive |url=https://www.rac.co.uk/drive/news/fuel-news/fuel-prices/ |access-date=2025-05-14 |website=www.rac.co.uk |language=en}}</ref> This is similar to the most paid across the EU, with Denmark and Ireland paying 1.43 and 1.42 per litre respectively. Diesel in France and Germany costs less on average at £1.31 and £1.32 per litre. The country that pays the least for diesel in the EU is Bulgaria at £1 per litre. <ref name=":1" />
=== Aviation === Avtur receives a full rebate of fuel duty when used as fuel for an aircraft, excluding private aircraft. Avtur for commercial flights within the UK and all private flights is normally liable to VAT.<ref>{{Cite web |date=2024-02-07 |title=Aviation turbine fuel (Excise Notice 179a) |url=https://www.gov.uk/guidance/aviation-turbine-fuel-excise-notice-179a |access-date=2024-06-20 |website=GOV.UK |language=en}}</ref> There is no VAT charged on avtur for international flights in accordance with the Convention on International Civil Aviation,<ref>{{cite web |date=2006-03-13 |title=UK taxpayers 'subsidise' airlines by 300 each every year |url=http://www.foe.co.uk/resource/press_releases/uk_taxpayers_subsidise_air_10032006.html |url-status=dead |archive-url=https://web.archive.org/web/20110709163522/http://www.foe.co.uk/resource/press_releases/uk_taxpayers_subsidise_air_10032006.html |archive-date=2011-07-09 |publisher=Friends of the Earth}}</ref> although commercial operators do pay Air Passenger Duty.
Avgas, used by some smaller planes, was taxed at half the rate of road petrol for all users until October 2008, when the reduced rate was limited to commercial flying. A minority of light planes use standard road petrol and pay tax at the normal rate.<ref>{{cite web|url=http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_PROD1_029598&propertyType=document|title=Fuel used in private pleasure craft and for private pleasure-flying|publisher=HM Revenue and Customs|quote=Position up to 31 October 2008: Two main fuels are used in aviation: Aviation turbine fuel (Avtur) which is used in commercial jet and turbo-prop aircraft and aviation gasoline (avgas) which is used mainly in small piston-engined aircraft. Helicopters use both avtur and avgas. Some micro-light aircraft can fly on unleaded petrol. Until 31 October 2008 all avtur, which is an unmarked type of kerosene, was fully rebated to a nil rate of duty. All avgas was subject to a reduced duty rate which was set at half of the leaded petrol rate whether it was used for commercial or private pleasure use.taxed. Changes introduced on 1 November 2008 The expiry of the derogation gave rise to the requirement to charge the full rate of duty on fuel used for private pleasure-flying and led to changes in the treatment of both avtur and avgas. Unleaded petrol used in private pleasure-flying is not affected as it was already subject to duty at the full rate as used in road vehicles.}}</ref>
=== Buses === {{main|Bus Service Operators Grant}} The Bus Service Operators Grant provides a fuel duty rebate to local bus service operators (but not for express coach which receives no rebate). As of April 2010 the rebate was £0.43 for diesel, £0.2360 for road fuel gas other than natural gas and 100% for biodiesel and bioethanol. Additional rebates are available for increasing fuel efficiency, low carbon emission vehicles and equipping vehicles with Smartcards and GPS tracking equipment.<ref name=rates>{{cite web|url=http://www.dft.gov.uk/pgr/regional/buses/busgrants/bsog/rates.pdf |title=Bus Service Operators Grant (BSOG) rates in England |publisher=Department for Transport |url-status=dead |archive-url=https://web.archive.org/web/20101122085143/http://dft.gov.uk/pgr/regional/buses/busgrants/bsog/rates.pdf |archive-date=2010-11-22 }}</ref>
In 2001 it was proposed that long-distance scheduled coach services should receive the rebate in return for offering half-price fares to older and disabled passengers.<ref name=cm200102>{{cite web|url=http://www.parliament.the-stationery-office.co.uk/pa/cm200102/cmselect/cmtlgr/828/82804.htm|title=II. Trends in the bus industry|work=Hansard|url-status=dead|archive-url=https://web.archive.org/web/20070930024005/http://www.parliament.the-stationery-office.co.uk/pa/cm200102/cmselect/cmtlgr/828/82804.htm|archive-date=30 September 2007|df=dmy-all}}</ref>
===Construction and farm vehicles=== thumb|upright|Filling station selling 'red diesel' 2008 Certain registered construction and farm vehicles are allowed to use 'red diesel' which includes a fuel dye and has a significantly reduced tax levy compared to normal road fuel. There are restrictions around the types of vehicle it can be used in and the purposes it can be used for, and there are heavy fines for misuse.<ref name=":0">{{Cite web |date=2024-01-18 |title=Using rebated fuels in vehicles and machines (Excise Notice 75) |url=https://www.gov.uk/guidance/using-rebated-fuels-in-vehicles-and-machines-excise-notice-75#vehicles-that-may-use-red-diesel |access-date=2024-10-30 |website=GOV.UK |language=en}}</ref><ref>{{cite news |date=2007-11-03 |title=Thousands using illegal car fuel |url=https://news.bbc.co.uk/2/hi/uk_news/7076799.stm |access-date=2024-10-30 |work=BBC News}}</ref>
===Trains=== Diesel used for passenger trains is zero-rated for VAT.<ref>{{Cite web |date=2022-05-18 |title=The VAT treatment of passenger transport (VAT Notice 744A) |url=https://www.gov.uk/guidance/the-vat-treatment-of-passenger-transport-notice-744a |access-date=2024-10-30 |website=GOV.UK |language=en}}</ref> Trains are allowed to use red diesel and rebated biodiesel, as they are included in the category of "Any vehicle designed to be operated on a railway" and in the list of exempted machines.<ref name=":0" /><ref>{{Cite web |date=2024-02-22 |title=Hydrocarbon Oil Duties Act 1979 Schedule 1A |url=https://www.legislation.gov.uk/ukpga/1979/5/schedule/1A#commentary-key-7aa6d2c9dd1cfb354c1d67514febb476 |access-date=2024-06-19 |website=legislation.gov.uk}}</ref><ref>{{Cite web |title=Reform of red diesel and other rebated fuels entitlement |url=https://www.gov.uk/government/publications/reform-of-red-diesel-entitlements/reform-of-red-diesel-and-other-rebated-fuels-entitlement |access-date=2024-06-19 |website=GOV.UK |language=en}}</ref> As a result, fuel for passenger services is just taxed at the marked gas oil (red diesel) rate.<ref>{{Cite web |title=Trains over planes: Why the government should encourage domestic train travel |url=https://www.if.org.uk/research-posts/trains-over-planes-why-the-government-should-encourage-domestic-train-travel/ |access-date=2024-10-30 |website=Intergenerational Foundation |language=en-GB}}</ref>
To incentivise the use of cleaner fuels in trains, the duty was reduced from 53p to 8p for blends of red diesel and biodiesel used in approved pilot schemes in the Budget 2007.<ref>{{cite web|url=http://www.atoc-comms.org/dynamic/atocpress-story.php?atoc=997790|title=Train Operators Welcome Chancellor's Cut In Biofuel Duty |publisher=Association of Train Operating Companies |date=6 December 2006 |archive-url=https://web.archive.org/web/20080604110454/http://www.atoc-comms.org/dynamic/atocpress-story.php?atoc=997790 |archive-date=2008-06-04}}</ref><ref>{{Cite web |date=2006-12-06 |title=Pre-Budget Report - Hansard - UK Parliament |url=https://hansard.parliament.uk/Commons/2006-12-06/debates/06120652000002/Pre-BudgetReport |access-date=2024-06-19 |website=hansard.parliament.uk |at=Column 311 |quote="I can also announce that, to incentivise the use of cleaner fuels in trains in the same way as we do for cars, the tax rate for piloting rebated fuels mixed with biofuels will be reduced from 53p to 8p."}}</ref><ref>{{Cite book |date=2007-03-21 |title=Budget 2007 Building Britain's long-term future |url=https://assets.publishing.service.gov.uk/media/5a7ce62ae5274a724f0be30e/0342.pdf |page=221 |isbn=978-0-10-294455-6 |quote="As announced in the 2006 Pre-Budget Report, with effect from 1 March 2007, red diesel and biodiesel blends may be used in approved pilot schemes at the red diesel rate (7.69ppl). " |last1=Treasury |first1=Great Britain |publisher=The Stationery Office }}</ref>
==See also== * Road pricing in the United Kingdom * Motoring taxation in the United Kingdom * Fuel tax (for international comparisons)
==References==
{{Reflist}}
==External links== * [http://www.legislation.gov.uk/ukpga/1979/5/contents Hydrocarbon Oil Duties Act 1979] * [http://www.hmrc.gov.uk/budget2009/bn66.pdf Hydrocarbon Oils Duty Rates] UK HM Revenue & Customs website * [http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_CL_000856&propertyType=document Hydrocarbon Oils: Customs Duty] UK HM Revenue & Customs website * [http://www.hmrc.gov.uk/budget-updates/march2011/fuel-duty.pdf 2011 Hydrocarbon Oil Duty Rates] UK HM Revenue & Customs website * [https://www.theguardian.com/technology/blog/2008/may/22/youthinkfuelpricesarebad You think fuel prices are bad? Historically, they're not - and we've graphed it]
{{Energy in the United Kingdom|sources}}
{{DEFAULTSORT:Hydrocarbon Oil Duty}} Category:Motoring taxation in the United Kingdom Category:Petroleum in the United Kingdom Category:Vehicle taxes Category:Fuel taxes