The withdrawal of the cut in fuel duty means filling up will cost more, says Paul Lewis
In 18 months’ time the Chan[1]cellor could be taking an extra 8p per litre every time you fill up your fossil-fuel car. She announced in her November Budget that a temporary 5p per litre cut in fuel duty made in March 2022 would be withdrawn in stages. On 1 September 2026 the first 1p will go, followed by a further 2p in December and a final 2p on 1 March 2027 – the fifth anniversary of the temporary cut that was intended to help us with the cost of living crisis, restoring fuel duty from 52.95p a litre to 57.95p. VAT of 20% is added to the duty, so the extra 5p will mean a 6p rise in the price of a litre of petrol or diesel.
The Chancellor also announced she would restore the annual increase in fuel duty in line with inflation. That automatic rise was paused in 2011 and has been cancelled every year since. The Chancellor has cancelled it again this April, but the Budget papers make clear that the annual rise will be back from 2027/28. That will raise fuel duty each tax year by the forecast rise in the Retail Prices Index. The Office for Budget Responsibility expects that to be around 3.3%, which would add nearly another 2p to the duty.
These four rises, including VAT, would mean a total increase at the pump of a little over 8p per litre in just a few months. When the 5p per litre cut was introduced in 2022, petrol retailers did not pass on the full 6p cut. They will probably not be as reluctant to put up prices when the cut is phased out!
So to help drivers find the lowest prices for fuel near where they are, the Govern[1]ment promises a new national “Fuel Finder” service. All petrol and diesel retailers will have to share their prices with the service in real time. The Treasury estimates motorists who use it will save £40 a year.
There are already free comparison sites such as petrolprices.com or checkfuelprices.co.uk, but they may not include all retailers. The RAC Foundation (racfoundation.org) keeps an up-to-date list of the major brands’ average prices – with Asda (though not Asda Express) currently the cheapest. Check locally to find your best deal.