Long-term strategy needed amidst tumbling fuel duty tax take

Today’s HMRC monthly tax receipts show fuel duty receipts from April 2024 to March 2025 are £24.7 billion, which is £0.2 billion lower than the same period last year.

Sheena McGuinness, co-head of Energy and Natural Resources at RSM UK, said: “It's not surprising that this tax is continuing to decrease. Fuel duties in the UK have been subject to both freezing and temporary reductions and that will be a contributing factor to the declining tax take. 

“The 5 pence per litre cut introduced in 2022/23 and unexpectedly extended to March 2026 in the Autumn Budget 2024, makes the current rate the lowest in cash terms since March 2009. Prior to the cut, fuel duties were frozen for 11 years. This low rate is a strong contributing factor to the declining fuel duty revenues. 

“Whilst this helps with the cost-of-living, it is not encouraging drivers to make the switch to low and no emission vehicles, so it is expected that come March 2026 this will increase to motivate consumers to shift to electric vehicles and support the government’s ambitious targets to reduce the number of petrol and diesel vehicles by 2030.

“With the declining fuel duty revenues, and anticipated increases that could accelerate the decline further, what form of alternative funding mechanism will replace the fuel duty to maintain the current tax take. The government has ruled out introducing road pricing, but industry and consumers alike need a long-term strategy and some certainty on the future cost of motoring to support the transition to electric vehicles.”