The change is due to a tax cut freeze set to be thawed out from next year.
Illustrative image of a driver looking frustrated. (Image: Getty)
Petrol drivers will face 69p per litre charges due to a tax cut freeze which is being thawed out from 2026. Fuel duty is a tax “included in the price you pay for petrol, diesel and other fuels used in vehicles or for heating”, the Government explains on its website.
The tax is currently levied at a flat rate of 52.95p per litre for petrol and diesel. After that, VAT at 20% is charged on the sum of the duty and the pre-tax pump price. At the moment, fuel duty and the VAT it’s subject to comes to around 64p (63.5p) per litre (not including VAT on the pump price, which isn’t constant, and depends on the final sale price).
The 52.95p rate has been frozen since 2011-12 and includes a temporary 5p cut brought in in 2022-23 that has since been extended on a number of occasions, most recently to September 2026 in Rachel Reeves‘ Autumn Budget last month.
After that point the government plans to drop the 5p cut in three stages.
On September 1st next year, it will reduce it by 1p, then by 2p on December 1 2026, before returning to pre-March 2022 levels by dropping the remaining 2p of the cut on March 1, 2027.
Under this approach, once the cut is fully phased out, the flat rate will be 57.95p, with drivers charged around 69.54p per litre based on the duty and then 20% VAT charged on top of the duty.
It means drivers will fork out an automatic 69p per litre at the pumps in tax before all the other costs are added on top, including more VAT on the final sale price.
According to the Office for Budget Responsibility (OBR) fuel duties “represent a significant source of revenue for the Government”.
“In 2025-26, we expect fuel duties to raise £24.4 billion. That would represent 2.0% of all receipts and is equivalent to £850 per household and 0.8% of national income,” it adds.
Lifting the fuel duty freeze attracted criticism, with Shadow Chancellor Sir Mel Stride claiming: “Now after just one year Labour are putting up the duty and reaching into the pockets of commuters and hardworking families — all because they are too weak to control spending.”
Ms Reeves also unveiled a new pay-per-mile charge for electric cars and plug-in hybrids. It will see EVs charged 3p per mile, with plug-in hybrids charged at 1.5p. The EV levy will be rolled out from 2028.
