During the spring and autumn budgets set out by the Chancellor of the Exchequer (currently Jeremy Hunt), many changes to plans for the economy are announced.

This can include the likes of pension increases, national insurance cuts and fuel duty freezes.

The "temporary" fuel duty cut of 5p which was introduced by Prime Minister Rishi Sunak in 2022 is due to expire this month after it was extended for 12 months in March 2023.

However, stated government policy is that fuel duty should rise in line with inflation, but this has not happened since 2011, reports Sky News.

But what exactly is fuel duty and how does it affect you? Let’s take a closer look.

What is fuel duty in the UK?

Fuel duty is included in the price you pay for petrol, diesel and other fuels used in vehicles or for heating and represents a significant source of revenue for the government.

The Office for Budget Responsibility explains: “In 2023-24, we expect fuel duties to raise £24.3 billion. That would represent 2.3% of all receipts and is equivalent to £867 per household and 0.9% of national income.”

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What is the current fuel duty rate in the UK?

The rate depends on the type of fuel used, including:

  • the headline rate on standard petrol and diesel is 52.95p per litre, it has been frozen since 2011-12 and it reflects a temporary 5p cut in 2022-23 and 2023-24. This also applies to biodiesel and bioethanol;
  • the rate on liquefied petroleum gas is 28.88p per kilogram;
  • the rate on natural gas used as fuel in vehicles (e.g. biogas) is 22.57p per kilogram; and
  • the rate on ‘fuel oil’ burned in a furnace or used for heating is 9.78p per litre.

The Office for Budget Responsibility adds: “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% VAT on the pre-tax price and a further 10.59p for VAT at 20% on fuel duty."