Excise duty - road fuel and other oils


The measure

Excise duty on the main road fuels, unleaded petrol and diesel were increased by 2p per litre on 1 September 2009 to 56.19p per litre. These duties will be increased on 1 April 2010 by 1p per litre to 57.19p per litre.

These duties will be further increased on:

  • 1 October 2010 by 1p per litre and on
  • 1 January 2011 by 0.76p per litre.

Finally, duties will be increased on

  • 1 April 2011 to 2014 by 1% above inflation each year.

The same increase of 1p per litre will also be applied to leaded petrol and will take effect on 1 April 2010, increasing the rate to 66.91p per litre. This rate will be further increased on 1 October 2010 by 1p per litre and on 1 January 2011 by 0.76p per litre.

Following the ending of the duty differential on biofuels for road use, the duty rates for biodiesel and bioethanol will be increased to the same rate as the main road fuels, to 57.19p per litre. These duties will be further increased on 1 October 2010 by 1p per litre and on 1 January 2011 by 0.76p per litre. Biodiesel made from waste cooking oil will continue to benefit from a 20p per litre duty differential for a period of two years via a relief scheme to be introduced on 1 April 2010.

The rate of excise duty applicable to aviation gasoline ("Avgas") used for domestic flights will be increased by 3.78p per litre on 1 April 2010. This rate will be further increased on 1 October 2010 by 1p per litre and on 1 January 2011 by 0.76p per litre.

On 1 September 2009 the excise duty rate for road fuel natural gas was increased to 22.16p per kg to maintain the differential with main road fuels in pence per litre equivalents. The excise duty rate for road fuel liquefied petroleum gas ("LPG") was increased to 27.67p per kg to reduce the differential with main road fuels by the equivalent to 1p on a litre of petrol. These rates will be increased further on 1 October 2010 by 1.44p and 2.86p per kg respectively to maintain their differential with main road fuels. From 2011 to 2014, the duty differential for road fuel natural gas will be maintained and that for LPG will be reduced by the equivalent of 1p on a litre of petrol each year.

The effective rates for non-road fuels will be increased on 1 April 2010 by the same percentage as the main road fuels. These rates will be similarly increased on 1 October 2010, 1 January 2011, and 1 April 2011 to 2014.
 

Who will be affected?

A wide range of businesses and consumers will be affected.

When?

The dates when the new rates of excise duty are to be affected are included in the details of the measure above.

Our view

The increase in road fuel excise duties is likely to hit motorists hard in the current economic climate and the road transport industry has indicated that it will be hit especially hard. This year, the 1p increase is slightly lower than the anticipated 2p. This suggests that the Chancellor has taken into account the current economic situation but has also secured an additional source of revenue to compensate for the larger increase which would have been generated. Users of biofuels for road use will also be hit very hard as the 20p excise duty differential with other road fuel will cease from 1 April 2010. The increase to the rate of Avgas will also affect on domestic flights and increase the cost of travel. The increase of non-road fuels should not, in many instances, directly affect the excise duty on oil used to generate electricity for home users as this can be relieved.