Fuel duty revenue ticks down as energy crisis intensifies cost pressures
The latest HMRC monthly tax receipts show fuel duty receipts April 2025 to March 2026 are at £24.3 billion, which is £0.1bn lower than the same period last year.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK said: “The downtick in fuel duty revenue shown in today’s data is indicative of a longer-term shift to electric vehicles (EVs). With the ongoing conflict in Iran causing concerns over fuel shortages and spiking prices, the downtick may also be driven by consumers beginning to limit their vehicle usage to necessary journeys.
“Given the rising fuel prices, and with fuel duties comprising over 50% of the pump price in the UK, logic would dictate that the fuel duty revenues would increase due to the increasing tax base in the form of rising fuel prices. As such, the decrease in revenues shows a clear reduction in fuel usage.
“With the onset of the war in Iran driving significant and sustained hikes in fuel prices, the downward trend seen in the fuel duty revenue figures could reverse in future months. However, this is unlikely to provide much relief to the economy when set against the wider backdrop of price inflation and cost pressures for businesses and consumers, with some suppliers adding a fuel duty supplement to their service charges including the services provided to schools and hospitals.
“The figures come hot off the heels of the government’s recent announcement of its plans to better shield businesses and households from the volatility of international gas prices. The shake-up aims to “weaken the link between the prices of electricity to gas” which could be complex and could deter investment into renewables if the competitive advantage is undermined – slowing the UK’s energy transition. In addition, the plans may not impact bills in the short-term so wouldn’t tackle the immediate cost of living squeeze.
“Delaying plans for fuel duty to increase in September would offer some respite to the ongoing uptick in costs, but this future headwind could incentivise some to switch to EVs to avoid additional costs of fuel – accelerating to transition to zero emissions motoring.
“The ongoing energy crisis has also highlighted the UK’s vulnerability to global energy price increases as a net importer of energy. The recent extension of Norway’s North Sea oil and gas licences has intensified pressures for the UK government to lift its ban on new licenses, especially given Norway’s position as one of the UK’s main sources of imported energy (alongside the US).
“To improve the UK’s energy security, further investment into domestic energy production is needed to mitigate global volatility risks, to which we are currently acutely exposed.”