Fuel duties are levied on purchases of petrol, diesel and a variety of other fuels. They represent a significant source of revenue for government. In 2023-24, we expect fuel duties to raise £24.3 billion. That would represent 2.3 per cent of all receipts and is equivalent to £867 per household and 0.9 per cent of national income.
Fuel duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel and other fuels used in vehicles or for heating. The rate depends on the type of fuel:
- the headline rate on standard petrol and diesel is 52.95 pence per litre, it has been frozen since 2011-12 and it reflects a temporary 5 pence cut in 2022-23 and 2023-24. This also applies to biodiesel and bioethanol;
- the rate on liquefied petroleum gas is 28.88 pence per kilogram;
- the rate on natural gas used as fuel in vehicles (e.g. biogas) is 22.57 pence per kilogram; and
- the rate on ‘fuel oil’ burned in a furnace or used for heating is 9.78 pence per litre.
VAT is applied after fuel duty, so, for example, the pump price of a litre of petrol currently reflects the pre-tax price plus 52.95p for fuel duty plus 20 per cent VAT on the pre-tax price and a further 10.59p for VAT at 20 per cent on fuel duty.