Drop in fuel duty revenue signals further investment uncertainty for UK energy sector

Today’s HMRC monthly tax receipts show that annual fuel duty receipts in 2025 are £24.6bn, which is £0.2bn lower than in 2024. In addition, it is expected that the Energy Profits Levy revenues in April 2025 will continue the broadly downward trend since the windfall tax was introduced in 2022. 

Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK, said: “Whilst the tax take for the majority of other taxes have increased, fuel duty receipts continue to fall. This decline is even more stark when tax revenues on average are increasing steadily, with the 2023-24 tax year seeing an annual uptick of 5.3%. But, aside from shrinking fuel duty revenue, the energy sector is facing continued investment uncertainty amidst shrinking profitability in renewables, with SSE the latest energy giant to slash £3bn in green energy spending plans. The sector has faced further setbacks, including Orsted’s decision to abandon plans for the Hornsea 4 offshore windfarm. 

“More worryingly, recent data indicates a move away from renewables between December 2024 and February 2025, as electricity generation by gas increased by 17%, whereas renewables fell by 8.7%. However, increasing renewable electricity generation remains crucial to achieving net zero goals, enhancing energy security, and reducing reliance on imports, especially as the UK’s total electricity consumption including imports in Q1 2025 was the highest Q1 consumption in recent years. 

She added: "The UK’s move away from North Sea oil and gas investment and a growing reliance on energy imports indicate that we’re not making quick enough progress to bridge the gap between domestic supply and demand. As such, it casts doubt over the government’s ability to meet its net zero growth ambitions. With the Industrial Strategy expected in June, if the government is serious about energy transition and the role of the energy sector in driving economic growth, tackling the fall in revenue needs to be addressed as part of a long-term strategy which encourages productivity and reinvestment of profits.”