Diesel drivers already facing record-high prices could pay even more in the coming months unless Chancellor John Healey extends the fuel duty cut again. From the start of 2027, the end of the fuel duty freeze is set to push pump prices up by 5p per litre, just months after the conflict in Iran has driven diesel prices to a new UK record high.
Fuel duty freeze set to end
The tax on fuel has stood at 57.95p per litre since 2011, but drivers have paid an effective rate of 52.95p since 2022 due to a "temporary" 5p cut that successive governments have repeatedly extended. The current 5p cut has been extended once more, from September until the end of December 2026, and is scheduled to end on January 1, meaning the tax and prices are set to rise again.
When asked if the freeze could be extended again, Chancellor John Healey refused to be drawn on plans and said nothing would be announced until the Budget in October.
Tax breakdown per litre
Once the fuel duty freeze ends, drivers will pay nearly 58p per litre in fuel duty on every litre of petrol, not including the 20% VAT charged on the final price. With VAT added on top of the fuel duty, the total tax take per litre reaches 91p, based on today's all-time-high diesel prices of 199.53p per litre average, according to the RAC's fuel watch.
The RAC explains: "The total retail price paid at the pump also includes a significant amount of tax – 57.95p per litre in fuel duty and 20% VAT. This means that over 60% of the price we pay at the pump goes direct to the Treasury, which together with car tax and 'showroom' tax totals more than £40bn a year."
Chancellor's response
Fuel cost calculator DVANA shows that at current average diesel prices of 199.53p per litre, drivers will pay almost 58p in fuel duty and 33p in VAT for a total of 91p in tax charges per litre, with the remaining £1.08 going to the retailer.
Mr Healey told ITV News: "It's something I'm concerned about and people have seen the diesel and petrol prices rising over recent months. They've seen us put in place a Fuel Finder so people can find out the cheapest price on the forecourts around them. They've seen us put in place a freeze on any rise in diesel (duty) until the end of the year."
Asked whether he will consider extending the current 5p cut in fuel duty beyond the end of this year, the Chancellor said he will announce that decision in the Budget on October 28. He said: "I'm conscious of the pressure this is putting on people, on businesses as well as people at the pumps, and this is a government that will do what we can to give people a bit of breathing space. But those are decisions that I will make in the round at the Budget."
