Fuel duty will stay frozen for the 15th year in a row, and the temporary 5p cut on petrol and diesel will continue, the Chancellor confirmed in the Autumn Budget. Rachel Reeves has decided not to raise fuel duty immediately, giving millions of drivers short-term relief at the pumps.
However, the Government plans to introduce “staged increases” from September. This includes ending the 5p cut brought in back in 2022, when fuel prices spiked after Russia’s invasion of Ukraine. These increases are intended to help recover the Treasury’s estimated £3 billion loss from holding duty down.
The Chancellor also confirmed that a new Fuel Finder scheme will launch in February. This will require fuel stations to share price changes in real time, aiming to expose “rip-off” retailers and help drivers find the cheapest pump prices.
At today’s average prices, fuel duty makes up around 39% of what drivers pay for petrol, and once VAT is added, tax accounts for 56% of the total price.
RAC head of policy Simon Williams said drivers would be relieved the 5p cut remains for now, saving them more than £3 per tank. However, he warned this relief will be short-lived once the staged increases begin in September.
What Rachel Reeves said
During her Budget speech, the Chancellor explained:
- The 5p fuel duty cut was due to end in April, with duty rising in line with inflation.
- She is extending the 5p cut until September 2026 to help with high commuting costs.
- Fuel stations will soon have to publish real-time prices through the new Fuel Finder service, helping motorists avoid overpaying and saving the average household around £40 a year.
AA president Edmund King said the continued freeze removes a major concern for millions of drivers. He noted the 5p cut saves around £3.30 per tank, adding up for workers who fill up twice a month.
Steve Gooding from the RAC Foundation said drivers of petrol and diesel cars – around 30 million vehicles – will be worried about the return of inflation-linked increases, as fuel prices remain a major cost for households.
What the fuel duty freeze means for drivers
If the Chancellor had ended the 5p cut immediately, the price of petrol and diesel would have risen by 6p per litre, including VAT.
Based on this week’s averages:
- Petrol would have jumped from 137.2p to 143.2p.
- Diesel would have risen from 146.2p to 152.2p.
Extending the cut until September means a driver with a typical 55-litre tank saves about £3.30 each time they fill up. Over a year, based on 7,000 miles and a 36mpg petrol car, this amounts to around £53 in savings.
What it means for the Exchequer
The Office for Budget Responsibility (OBR) says freezing fuel duty until September 2026 will reduce tax revenue by £2.4 billion next year and £0.9 billion in the medium term. However, the exact policy change was finalised too late to be fully included in its inflation forecast.
Fuel duty receipts are expected to fall to around £12 billion a year in the 2030s - about half of today’s level - and could fall close to zero by 2050, partly due to the shift to electric vehicles.
Fuel duty is now a third lower in real terms than in 2010. The Resolution Foundation estimates the cumulative cost of the freeze and 5p cut since 2010 at £130 billion.
How much tax makes up the price of fuel?
Based on today’s prices:
- Petrol (137.2p): duty of 52.95p makes up 39% of the price. With VAT included, total tax is 56%.
- Diesel (146.2p): duty makes up 36%, rising to 53% with VAT.
So more than half of what drivers spend at the pump goes to the Treasury - around £42 of a typical £76 petrol fill-up, or £42 of an £80 diesel fill-up.
UK fuel tax compared with Europe
Even with the freeze and 5p cut, the UK still ranks among the highest in Europe for fuel taxation.
- Petrol: UK duty of 52.95p (approx €0.62) makes it the 10th highest in Europe.
- Diesel: UK duty is one of the highest, second only to Italy.
Unlike most EU nations, the UK charges the same excise duty on both petrol and diesel.
What happens next: Fuel Finder launches February 2026
The Fuel Finder scheme will require all forecourts to report pump price changes to a central database within 30 minutes. This real-time transparency has already been shown in Europe to increase competition and push prices down.
The move follows criticism from the Competition and Markets Authority, which said retailers’ margins have been “consistently bloated”. Pump prices rose again just before the Budget, with the AA accusing retailers of hiking prices ahead of the Chancellor’s announcement.
Fuel Finder will highlight the cheapest forecourts, putting pressure on higher-priced retailers to lower prices or risk losing customers. Cheaper stations will also benefit from increased visibility.
RAC’s Simon Williams said the scheme’s launch will be a major moment, giving drivers a clear picture of pump prices for the first time.
