Policy paper

Amended Fuel Duty rates: 2026 to 2027

Published 22 May 2026

Who is likely to be affected

Manufacturers, importers, distributors, retailers and household and business consumers of petrol, diesel and other fuel products that are subject to Fuel Duty.

General description of the measure

This measure will extend the temporary 5 pence per litre (ppl) cut in the rates of Fuel Duty, first introduced at Spring Statement in March 2022, until 31 December 2026. The measure also provides a further reduction to the rebated rate for gas oil (red diesel), biodiesel and bioblend by 3.7 ppl from 15 June 2026 to 31 December 2026. The legislative default will be for rates to return to the levels set at Budget 2025 from 1 January 2027, but the government will confirm final rates at Budget 2026.

The current and future Fuel Duty rates are shown in the following tables. All rates are pound (£) per litre unless stated otherwise.

Light oils

Type	Rates prior to 23 March 2022	Rates to 31 December 2026	Rates from 1 January 2027	Rates from 1 March 2027
Unleaded petrol	0.5795	0.5295	0.5595	0.5795
Light oil (other than unleaded petrol or aviation gasoline)	0.6767	0.6267	0.6567	0.6767
Aviation gasoline (Avgas)	0.3820	0.3629	0.3743	0.3820
Light oil delivered to an approved person for use as furnace fuel	0.1070	0.0978	0.1033	0.1070

Heavy oils

Type	Rates prior to 23 March 2022	Rates to 31 December 2026	Rates from 1 January 2027	Rates from 1 March 2027
Heavy oil (diesel)	0.5795	0.5295	0.5595	0.5795
Marked gas oil	0.1114	0.0648 (effective from 15 June 2026)	0.1076	0.1114
Fuel oil	0.1070	0.0978	0.1033	0.1070
Heavy oil other than fuel oil, gas oil or kerosene used as fuel	0.1070	0.0978	0.1033	0.1070
Kerosene to be used as fuel for an excepted machine (other than for heating)	0.1114	0.0648 (effective from 15 June 2026)	0.1076	0.1114

Biofuels

Type	Rates prior to 23 March 2022	Rates to 31 December 2026	Rates from 1 January 2027	Rates from 1 March 2027
Bioethanol	0.5795	0.5295	0.5595	0.5795
Biodiesel	0.5795	0.5295	0.5595	0.5795
Biodiesel for use in an excepted machine	0.1114	0.0648 (effective from 15 June 2026)	0.1076	0.1114
Gas oil bio blend for use in an excepted machine	0.1114	0.0648 (effective from 15 June 2026)	0.1076	0.1114

Road fuel gases

These rates are £ per kg.

Type	Rates prior to 23 March 2022	Rates to 31 December 2026	Rates from 1 January 2027	Rates from 1 March 2027
Road fuel natural gas including biogas	0.2470	0.2257	0.2385	0.2470
Liquefied petroleum gas (LPG)	0.3161	0.2888	0.3052	0.3161

Other fuel

Type	Rates prior to 23 March 2022	Rates to 31 December 2026	Rates from 1 January 2027	Rates from 1 March 2027
Aqua-methanol	0.0790	0.0722	0.0763	0.0790

Policy objective

This proposal provides support to motorists and other fuel users across the UK in response to elevated fuel prices arising from the Iran war. The continued freeze in Fuel Duty will mean that the average motorist will save over £120 per vehicle since Autumn Budget 2024.

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, it was announced that rates of Fuel Duty would be reduced for 12 months to support households and businesses at a time of high energy prices. This included cutting rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 ppl, with a proportionate percentage cut (equivalent to 5 ppl from the main Fuel Duty rate of 57.95 ppl) to the rates for other fuels and rebated fuels, where practical. The reduction was extended at fiscal events up to and including at Budget 2025, where a further extension to 31 August 2026 followed by a gradual return to early 2022 rates (reducing the cut by 1 ppl on 1 September 2026, 2 ppl on 1 December 2026, and 2 ppl on 1 March 2027) was announced, with Retail Prices Index (RPI) uprating in future years.

On 20 May 2026, the government announced that the 5 ppl cut will be extended from 1 September to 31 December 2026, with an additional temporary 3.7 ppl cut in the rebated rate of Fuel Duty for gas oil (red diesel), biodiesel and bioblend from 15 June 2026 until 31 December 2026. The legislative default will be for rates to return to their previous trajectory from 1 January 2027, but the government will confirm final rates at Budget 2026.

Detailed proposal

Operative date

The change will have effect from 15 June 2026.

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.

The temporary cut was provided for by the Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) Order 2022.

The Fuel Duty rates for 2026 to 2027 are contained in the Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) (Temporary Continuation of 2022 Order and Adjustments) Order 2026.

Proposed revisions

Secondary legislation will be introduced to adjust the liability to duties in sections 6-8 and the rebates in sections 11, 13AA, 13ZA, 14,14A and 14B of HODA. This will extend the 5 ppl cut until 31 December 2026 and introduce a further cut to the rate of rebated gas oil, biodiesel and bioblend. Fuel Duty rates will then be increased on 1 January 2027 and 1 March 2027 to return them to Fuel Duty levels before March 2022.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Empty	Empty	Empty	Empty	Empty	Empty

The costing for this measure will be subject to scrutiny by the Office for Budget Responsibility and will be set out at a future fiscal event.

Macroeconomic impact

The measure will have a direct effect on the Consumer Price Index (CPI). The extension of the 5 ppl cut to Fuel Duty until 31 December 2026 is expected to reduce CPI by 0.04 percentage points in quarter 4 2026.

Impact on individuals, households and families

This measure to extend the temporary cut to the rates of Fuel Duty is expected to positively impact up to an estimated 36 million individuals. While the temporary 5 ppl cut to Fuel Duty will end at the end of December 2026, motorists and other fuel users will continue to benefit from a lower rate of Fuel Duty in 2026 to 2027, compared to before March 2022.

The additional reduction in the rebated rate of Fuel Duty for gas oil, biodiesel and bioblend will positively impact individuals who use excepted vehicles and machines for qualifying purposes, such as agriculture or domestic heating. 

Fuel Duty is a tax on fuel producers and importers who ordinarily pass the cost of Fuel Duty through to motorists in the price of fuel. This measure is not expected to impact on family formation, stability or breakdown. This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as changes to the rates of Fuel Duty do not affect any processes or tax administration obligations.

Equalities impacts

An individual may be affected by this measure regardless of their protected characteristics. If a protected group is overrepresented in this population, then it will be disproportionately impacted. HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot determine conclusively if there are any equality impacts.

Administrative impact on business including civil society organisations

This proposal 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 new Fuel Duty rates and updating systems to reflect the changes. There are not expected to be any continuing costs.

This measure will benefit businesses and civil society organisations where fuel is part of ongoing running costs, particularly those eligible to use rebated fuels, such as farmers and rail freight operators. By extending the temporary 5 ppl cut, which would otherwise increase on 1 September 2026, fuel users will continue to incur a lower amount of Fuel Duty, compared to before March 2022.

This measure is not expected to disproportionately impact civil society organisations.

This measure is expected overall to have no impact on businesses’ experience of dealing with HMRC as the proposal does not change any processes or tax administration obligations.

Operational impact (£ million) (HMRC or other)

HMRC will not incur any costs implementing this decision.

Other impacts

This measure is being introduced to provide continued support to individuals, 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

The measure will be monitored through information collected from tax receipts and Fuel Duty returns, and will be assessed alongside other excise duty measures.

Further advice

If you have any questions about this change, contact Neil Mills by email at: neil.mills@hmrc.gov.uk.

Declaration

Dan Tomlinson MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.