Dwindling receipts and rising costs should prompt fuel duty rethink

Fuel duty has remained frozen at 52.95p per litre since 2011, offering some relief to drivers during periods of high fuel prices. However, at last year’s Budget, the Government announced plans to increase the rate by 5p per litre in stages over the coming year. This would see a 1p rise introduced in September 2026, followed by a further 2p in December 2026 and an additional 2p in March 2027.

While these increases are intended to bolster public finances, they come at a time when motorists continue to face elevated fuel costs, exacerbated in recent months by the war in Iran. If prices remain high, pressure is likely to mount on the Government to delay or scrap some, or all, of the planned increases.

Fuel duty receipts for March 2026 stood at £1.76 billion, the lowest monthly total since July 2023. This compares to £2.04 billion in March 2025 and £2.03 billion in March 2024. Annual receipts for the 2025/26 financial year totalled £24.25 billion, slightly down from £24.36 billion the previous year, marking the lowest yearly figure (excluding the pandemic-affected 2020/21 period) since 2006/07.

Jon Stride, chair of the ATT’s Technical Steering Group, said:

“Motorists have benefited from over a decade of frozen fuel duty, but with prices still high, any increase risks adding further pressure to household budgets. At the same time, falling fuel duty receipts underline the challenges facing the Treasury in relying on this revenue stream.

“The Government faces a difficult balancing act: supporting drivers while maintaining public finances. Given that the authorised mileage rate payable to employees has not changed for many years, it makes sense for the fuel duty to also remain unchanged. A decision to delay or cancel planned increases would be welcomed by motorists but would require careful consideration of the wider fiscal impact.”