Fuel duty and energy profit levy revenues continue to fall – totalling a £1bn hit to tax revenues
Today’s HMRC monthly tax receipts show fuel duty receipts for April 2025 to October 2025 are £16.4bn, which is £43m lower than the same period last year. The decline is largely attributed to the ongoing transition from diesel to electric and hybrid vehicles.
In addition, energy profit levy revenues are down 20% from £1.1bn in October 2024 to £888m this year.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK, said: “Fuel duty revenues continue to slide as more consumers transition from petrol and diesel vehicles to electric vehicles (EVs). This is a positive step in the right direction to meet ambitious net zero targets, but the introduction of the price per mile scheme, which is set to raise £1.4bn by 2029-30, could derail progress.
“Recent data suggests that intention to buy EVs has slipped since the budget, so it will be interesting to see if fuel duty revenues start to tick back up. However, this could be offset by the reversal of the 5p fuel duty cut which will land in September 2026.
She added: “Restrictions to oil field licences and steep additional taxes on oil-related activity continue to hit investment in the UK energy sector and, in turn, associated tax revenues, particularly the energy profits levy. This fell 20% when compared to the same period last year and forecasts were revised down in the budget to factor in the shrinking tax base.
“However, there was no change announced in the budget to the early termination mechanism which would be triggered if gas prices fall below the 2025-26 thresholds. It’s very unlikely that this will happen so the EPL will remain in place until 31 March 2030. This means the North Sea oil and gas tax base is likely to continue to retract, as investment leaves UK shores to be redeployed overseas towards more viable energy projects. The recent North Sea strategy could help to stem the flow of lost investment and bridge the gap to utilise domestic oil and gas, as we transition away from fossil fuels.
“However, the latest energy trends data shows volatility in our energy mix that exposes the UK to drops in domestic output, and demonstrates the need to get the right mix of power generation in place to plug the current gap between usable energy from the grid and actual demand with our energy mix comprising an increasing amount of imports.
“Investment is key here to ensure the UK remains competitive. Acknowledging the need for long term certainty for the energy sector, the government has recently consulted on a new, permanent measure to replace the EPL when it ends in 2030. However, we didn’t see any changes in the recent budget, which was a blow for the UK energy industry, as this could be a pivotal tool to stimulate investment and growth.”