Annual fuel duty receipts fall as electric vehicles take the wheel

Today’s HMRC monthly tax receipts show fuel duty receipts from April 2024 to December 2024 are £18.6b, which is £0.2b lower than the same period last year. 

Total fuel duty receipts for April 2023 to March 2024 are also £0.3b lower when compared to the same period a year earlier, primarily due to the transition from diesel towards electric and hybrid vehicles. 

Sheena McGuinness, Head of Renewables and Cleantech at RSM UK, said: “Fuel duties continue to fall year on year and no replacement scheme has been announced to help to boost the lost earnings. Fuel duties are the second highest indirect tax revenue generator to the UK tax purse after VAT, having contributed as much as 8% to the annual tax revenues received between 2004 and 2014. This is therefore an important source of revenue, but has been on a steady decline, contributing closer to 4% (inclusive of VAT) to the total UK tax take over the last four fiscal years.

“The OBR reported that the cumulative cost of freezing fuel duty rates between 2010/11 and 2025/26 currently stands at about £100b. Notwithstanding the loss of revenue as a result fuel duties not increasing in line with RPI inflation or other taxes, there is the additional loss of revenues as drivers switch to electric vehicles (EVs) which will also contribute to a shrinking tax take with respect to fuel duties.

“The government is in a tricky position as it can’t make EVs less attractive – they are already more expensive than their internal combustion engine (ICE) counterparts. The additional expensive car supplement also applies to EVs over £40k, with most new EVs falling under this tax, adding a further £2,000 on top of the price of the car. Therefore, further diminishing the attractiveness of EVs through a punitive road tax scheme or similar to try to fill the hole left by the dwindling fuel duties receipts is not viable.”