Autumn Budget set to address fuel duty gap as EV transition speeds up
Today’s HMRC monthly tax receipts show fuel duty receipts for April 2025 to September 2025 are £12.2bn, which is £26m lower than the same period last year. The decline is largely attributed to the ongoing transition from diesel to electric and hybrid vehicles.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK, said: “Fuel duty receipts continued their downward trajectory in September, reflecting the ongoing transition from petrol and diesel vehicles to electric vehicles (EVs). While this shows progress towards realising the UK’s net zero ambitions, reduced fuel duty is creating a widening gap in public finances which the government needs to tackle. Historically, fuel duty revenues have provided a significant proportion of the UK’s tax take, making up almost 7% in 2019/20. In contrast, the Office for Budget Responsibility (OBR) forecasts that fuel duty revenues will represent 2% of total tax revenues in 2025/26.
“With oil prices at their lowest level since early 2021, the Chancellor has a timely opportunity to reverse the 5p fuel duty cut and align rates with the Retail Price Index, leveraging favourable market conditions to strengthen public finances. The OBR has already factored both these aspects into its forecasts, meaning that without implementation, the Chancellor will need to find an additional £2.7bn from alternative sources. As such, it seems highly likely we will see a change to fuel duties in the forthcoming Autumn Budget.”
She added: “However, this measure alone will not be enough to offset the growing deficit caused by declining fuel duty revenues. The only sustainable solution is to develop an alternative fuel duty for the increasing number of EVs in the UK. We could therefore see the introduction of a price-per-mile scheme in the budget, which would represent a significant policy shift from the government’s previous stance ruling out such measures.”