Fuel Duty 2025: How Much Tax Is in Every Litre of Petrol?

What fuel duty is and who sets it

Fuel duty is an excise duty — a per-unit tax — charged on petrol, diesel and certain other fuels used in road vehicles. It is set by the Chancellor of the Exchequer and legislated through the Finance Act. Unlike VAT, which is a percentage of the price, fuel duty is a flat pence-per-litre charge applied before any other calculation.

VAT is then charged on top of both the underlying fuel cost and the fuel duty — meaning you pay VAT on the duty. This is known as "tax on tax" and is a distinctive feature of UK fuel taxation. In no other significant EU economy is the consumer charged VAT on an excise duty at this scale.

The rate of fuel duty is 57.95p per litre for unleaded petrol and diesel in 2025 — after the temporary 5p cut introduced in March 2022 expired in March 2025, returning the rate to its pre-cut level.

The exact breakdown per litre

The table below shows the breakdown of a typical pump price at different price levels. Calculations use the 57.95p duty rate, 20% VAT, with the remainder representing the fuel cost and retailer margin.

Pump prices are indicative based on average UK forecourt prices in May 2025 (RAC Foundation data). VAT is calculated as 20% of the final price divided by 6 (standard VAT extraction method). Figures rounded to 1 decimal place.

Historical fuel duty: how we got here

UK fuel duty has a long history of being used as both a revenue tool and an environmental policy lever. Key historical milestones:

• 1993–1999: The fuel duty escalator. Duty was increased each year by inflation plus 3–5% — an explicit policy to raise motoring costs and reduce emissions. By 1999, it had become deeply unpopular and was scrapped following nationwide fuel protests.
• 2000–2009: Real-terms freeze. Duty was raised only modestly and below inflation, losing real value.
• 2010–2011: Planned rises blocked. Several planned duty increases were cancelled following political pressure and high oil prices.
• 2011–2021: Nominal freeze. Fuel duty was frozen at 57.95p per litre for approximately 10 years — the longest freeze in modern UK history. In real terms, duty fell substantially as inflation eroded its value.
• March 2022: 5p temporary cut. In response to high oil and gas prices, duty was cut by 5p to 52.95p per litre.
• March 2025: Cut expires. The 5p cut was not extended; duty returned to 57.95p per litre from March 2025.

What fuel duty is spent on

Fuel duty goes into the Consolidated Fund — general government revenue — and is not hypothecated (ringfenced) for any specific purpose. It does not go directly to road building or maintenance, despite the widespread assumption that it does. According to the RAC Foundation and House of Commons Library analysis, in recent years total government spending on roads has been approximately £5–6 billion per year, while fuel duty and VED together raise approximately £33–34 billion. The excess goes into general spending.

This is a significant political point: drivers contribute far more in specific motoring taxes than is spent on roads. Whether this is the appropriate use of the revenue is a policy question — but the arithmetic is clear.

Electric vehicles: the coming change

The transition to electric vehicles presents a structural problem for fuel duty revenue. As the share of EVs on UK roads increases — the government's 2035 ban on new petrol and diesel car sales will accelerate this — fuel duty receipts will decline. The OBR has modelled this trajectory and projects a significant reduction in fuel duty revenue through the 2030s.

From April 2025, EVs became subject to Vehicle Excise Duty (VED) for the first time — previously they were exempt. This is the first step in a rebalancing of motoring taxation away from fuel and towards vehicle ownership and (likely, in future) distance travelled.

A road pricing system based on miles driven — long discussed but not yet introduced — would replace the per-litre fuel duty mechanism with a per-mile charge. The Treasury is acutely aware that doing nothing would cost it approximately £24 billion per year in fuel duty revenue as EV adoption grows.

How to cut your fuel tax bill

• Drive less: The most direct reduction. Even one fewer long journey per month saves meaningful amounts at current duty levels.
• Switch to an EV: Zero fuel duty. From April 2025, standard VED applies — but for most drivers, total annual motoring tax falls substantially.
• Use a cashback fuel card: For business drivers, fuel cards that return pence per litre can partially offset the duty cost. HMRC allows business mileage claims at the approved mileage rate (45p/mile for the first 10,000 miles), which includes an allowance for fuel duty.
• Claim mileage relief: If you use your personal car for business travel and are not reimbursed at the full HMRC approved rate, you can claim tax relief on the shortfall via self-assessment.
• Use supermarket fuel: Forecourt prices vary by several pence per litre; supermarket forecourts typically undercut branded forecourts by 3–6p. Over 10,000 miles, this represents a meaningful saving.