Higher oil price drives hike in fuel duty revenues
The latest HMRC monthly tax receipts show fuel duty receipts for April 2026 are at £2.3bn, which is £0.3bn higher than April 2025.
Energy Profit Levy (EPL) decreased from £2,857m for the financial year to 31 March 2025 to £2,474m in the year to March 2026. However, this downward trend is expected to reverse in 2026 due to global hikes in oil prices.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK said: “The impact of the Iran war is now feeding through, with the recent spike in fuel prices reversing the decline in fuel duty receipts, which have now jumped to £2.3bn. With the latest ONS statistics showing that fuel purchases in April declined by more than 10% month-on-month, it’s clear this spike in tax revenues is driven purely by the increasing cost of fuel, rather than an increase in consumer usage of petrol and diesel vehicles.”
“With fuel duty accounting for more than half of pump prices, and receipts increasing, it’s no surprise the government is stepping in to ease mounting inflationary pressures on households by delaying the planned fuel duty rise until the end of the year.
“While the monthly data for Energy Profit Levy (EPL) is missing from April’s figures, the annual data for 2025 to 2026 show a continued decline in revenues from previous years. These figures do not reflect the real time impact of the ongoing conflict in Iran, which we expect will drive the first uptick EPL revenues since October 2024. Despite dwindling investment due to restrictions to oil field licences driving a shrinking tax base and steep additional taxes on oil-related activity, the global hike in oil prices has driven extra revenues due to higher profits for operators. This, in turn, could be a windfall for GB Energy to reinvest into the transition to clean energy.
“However, any increases will not be driven by a rise in production or volumes, but purely down to the hike in oil prices, so the stagnation in investment in the North Sea remains and could increase as operators pause investment and divert capital overseas. As such, the government’s prediction in July 2024 that EPL revenues will grow due to the increase in the rate of EPL remains unsupported.
“Replacing the punitive EPL with the proposed Oil and Gas Price Mechanism could deliver a more stable policy environment to entice investment back to the UK – supporting the transition to a net zero future, boosting jobs and enhancing energy security.”