Volatile pump prices could facilitate long-term fall in fuel duty receipts
The latest HMRC monthly tax receipts show fuel duty receipts April 2026 to June 2026 are at £6.4bn, which is £0.4bn higher than the same period last year.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK said: “While today’s figures show a rise in fuel duty receipts, petrol prices continue to prove volatile, with the slight easing we saw in June coming to a halt amid renewed conflict. Alongside rising short-term costs for consumers and encouraging a more cautious approach to fuel usage, this ongoing volatility could support a longer-term shift away from petrol and diesel cars, as the prolonged elevation of costs encourages people to consider EVs. This, in turn, would drive forward the long-term decline in fuel duty revenues as a source of income from the government.
“It was announced last week that electric vehicle excise duty (eVED) will be uprated in line with CPI annually. This differs from fuel duty rates, which are intended to be uprated by RPI from April 2027, and could mean that the tax burden for EVs increases at a lower rate than that of petrol and diesel motorists over time, as RPI has historically run higher on average than CPI. While the impact is likely to be relatively small in the short term, it raises the question as to whether eVED is intended to perform a similar revenue-raising function to fuel duty.
“Linking the taxes to different inflation indices could create a two-tiered tax system, designed to further encourage transition to electric vehicles. However, the impact of the announcement on consumer behaviour is likely to be minimal, particularly in the short-term.
“In addition, the absence of EPL receipts data again this month is interesting. The quarterly data has been tracking down due to a shrinking tax base, but it has not been published in five months, highlighting a lack of transparency of the current trend, which is expected to have ticked up as higher oil prices drive higher profits.
“Andy Burnham’s appointment as Prime Minister has sparked speculation around whether he will unveil new plans for North Sea drilling. If new licenses are granted, this could increase EPL revenues and decrease the UK’s resilience on imported energy over time, particularly of Norwegian oil and gas, as well as coal imports from countries such as Venezuela.”