Hydrocarbon Oil Duty

Hydrocarbon Oil Duty (also fuel duty and fuel tax) is a fuel tax levied on some fuels used by most road motor vehicles in the United Kingdom; with exceptions for local bus services, some farm and construction vehicles and aviation, which pay reduced or no fuel duty.

The government revenue from fuel duty was £27.1 billion for the financial year 2014-2015. This is an increase in cash terms in comparison to 2013-2014 but now only represents 1.5% of GDP. This is in contrast to the start of the 2000s when it was 2.3% of GDP. A further £3.9 billion is raised from the VAT on the duty, contributing some 3.5 per cent of total UK tax revenues.[1] The Fuel Price Escalator, which was introduced in 1993 was abandoned after the disruptive fuel tax protests of 2000.

Filling station off the A40 roundabout - geograph.org.uk - 1169731
UK filling stations collected more than £27 billion in fuel duty in 2014-15.


The Finance Act 1908 introduced a petrol duty in the UK, with the rate being set at 3d (£0.013) per UK gallon, bringing the price of a typical UK gallon to 1s 1½d (equivalent to £6.67 in 2018).[2][3]

It was then abolished by the Finance Act 1919 after several years of steady petrol price rises and replaced by vehicle taxation, and the tax disc based on horsepower,[3] after which the cost of petrol was about 4s (equivalent to £9.03 in 2018)[2] per UK gallon.

In 1928, following market reductions in the cost of a UK gallon of fuel to about 1s 2½d (equivalent to £3.57 in 2018),[2] the Government introduced a tax of 4d (£0.017) per UK gallon[3] bringing the cost of a UK gallon of petrol to 1s 6¾d (equivalent to £4.62 in 2018).[2]

In the 1993 Budget during the Major ministry, Norman Lamont introduced a 10p rise and also a Fuel Price Escalator whereby the cost of fuel would be increased annually by 3 per cent above inflation in future years; the Petroleum Revenue Tax was reduced in the same budget and later abolished. Kenneth Clarke, the new chancellor, increased the escalator to 5p in November of that year. These increases were introduced at a time of considerable change in government transport policy, and followed major UK road protests, including the M11 link road protest and the protest at Twyford Down.[4] The escalator was increased in 6p per year in 1997 by Gordon Brown, chancellor for the new Blair ministry.

The escalator was effectively cancelled by the Brown ministry follow severe disruption caused by the fuel tax protests in 2000. Since that time more cautious increases have been applied.[3] A planned 3.02p/litre rise which was confirmed by the 2012 United Kingdom budget to come into effect on 1 August 2012[5] was later deferred until 1 January 2013 at short notice. The last increase in Fuel duty occurred in 2010. Taxation currently accounts for 75% of the total price of fuel at 99.7ppl.[6]

Rates and receipts

The rates since 23 March 2011 have been as follows:

Fuel Rate Notes
Petrol, diesel, biodiesel, bioethanol £0.5795[7] per litre
Natural gas used as road fuel (inc biogas) £0.2615[7] per kg
Road fuel gas other than natural gas £0.3304[7] per kg

VAT at the current rate is then added to the total price.[8] The taxation percentage of forecourt prices varies according to the price of oil, rising from 55.9% at 65p per litre untaxed to 61.4% at 50p per litre (2012 figures).

European comparisons

The UK average petrol price as of 11 January 2016 is £1.01 per litre. This is slightly above the European average but is 30p lower than the peak in 2014. With declining oil prices, it has been suggested petrol could fall to 86.9p per litre if oil prices fall to $10 a barrel. Average diesel prices are currently £1.03 per litre. The minimum petrol price available is 99.7p and £1.03 for diesel. The minimum across Europe is 87.9.[9]


No duty or VAT tax is levied on jet fuel, in accordance with the Convention on International Civil Aviation,[10] although commercial operators do pay Air Passenger Duty.

Avgas, used some smaller planes, was taxed at half the rate of road petrol for all users until October 2008, when the reduced rate was limited to commercial flying. A minority of light planes use standard road petrol and pay tax at the normal rate.[11]


The Bus Service Operators Grant provides a fuel duty rebate to local bus service operators (but not for express coach which receives no rebate). As of April 2010 the rebate was £0.43 for diesel, £0.2360 for road fuel gas other than natural gas and 100% for biodiesel and bioethanol. Additional rebates are available for increasing fuel efficiency, low carbon emission vehicles and equipping vehicles with Smartcards and GPS tracking equipment.[12]

In 2001 it was proposed that long-distance scheduled coach services should receive the rebate in return for offering half-price fares to older and disabled passengers.[13]

Construction and farm vehicles

Station Road Garage - prices - geograph.org.uk - 847101
Filling station selling 'red diesel' 2008

Registered construction and farm vehicles 'red diesel' which includes a fuel dye has a significantly reduced tax levy compared to normal road fuel. This can only be used in registered agricultural and construction vehicles including tractors, excavators, cranes and there are heavy fines for misuse.[14]


UK train operators are required pay full duty rates[15] with the exception of biofuels, for which the duty was reduced from 53p to 8p in 2006[16] and for electrified services.

See also


  1. ^ United Kingdom National Accounts: The Blue Book (Report). Office for National Statistics. 2010.
  2. ^ a b c d UK Retail Price Index inflation figures are based on data from Clark, Gregory (2017). "The Annual RPI and Average Earnings for Britain, 1209 to Present (New Series)". MeasuringWorth. Retrieved 27 January 2019.
  3. ^ a b c d "Fuel duties". Politics.co.uk.
  4. ^ "Gummer denies the 'great car economy'". The Independent. 20 March 1994.
  5. ^ "Budget 2012: Fuel duty increase gets go-ahead". BBC.
  6. ^ "The Chancellor could find himself in a bit of pickle..." BBC.
  7. ^ a b c "Hydrocarbon Oils: Duty Rates" (PDF). HMRC. Archived from the original (PDF) on 23 May 2011.
  8. ^ Leroux, Marcus (24 November 2008). "Fury as fuel duty lifted 2p to offset VAT cut". London: Times Newspapers. Retrieved 3 April 2009.
  9. ^ http://www.petrolprices.com/
  10. ^ "UK taxpayers 'subsidise' airlines by 300 each every year". Friends of the Earth.
  11. ^ "Fuel used in private pleasure craft and for private pleasure-flying". HM Revenue and Customs. Position up to 31 October 2008: Two main fuels are used in aviation: Aviation turbine fuel (Avtur) which is used in commercial jet and turbo-prop aircraft and aviation gasoline (avgas) which is used mainly in small piston-engined aircraft. Helicopters use both avtur and avgas. Some micro-light aircraft can fly on unleaded petrol. Until 31 October 2008 all avtur, which is an unmarked type of kerosene, was fully rebated to a nil rate of duty. All avgas was subject to a reduced duty rate which was set at half of the leaded petrol rate whether it was used for commercial or private pleasure use.taxed. Changes introduced on 1 November 2008 The expiry of the derogation gave rise to the requirement to charge the full rate of duty on fuel used for private pleasure-flying and led to changes in the treatment of both avtur and avgas. Unleaded petrol used in private pleasure-flying is not affected as it was already subject to duty at the full rate as used in road vehicles.
  12. ^ "Bus Service Operators Grant (BSOG) rates in England" (PDF). Department for Transport. Archived from the original (PDF) on 22 November 2010.
  13. ^ "II. Trends in the bus industry". Hansard. Archived from the original on 30 September 2007.
  14. ^ "Thousands using illegal car fuel". BBC News. 3 November 2007.
  15. ^ "Public Transport Subsidies". Hansard.
  16. ^ "Train Operators Welcome Chancellor's Cut In Biofuel Duty". Association of Train Operating Companies. 6 December 2006. Archived from the original on 4 June 2008.

External links

British Energy Efficiency Federation

The British Energy Efficiency Federation (or BEEF) was founded in 1996 by the United Kingdom Government to provide a forum for consultation between existing industry associations in the energy sector.

Centre for Renewable Energy Systems Technology

The Centre for Renewable Energy Systems Technology (CREST) is a research centre into renewable energy based in the Department of Mechanical, Electrical and Manufacturing Engineering, Loughborough University in England.

Confederation of UK Coal Producers

The Confederation of UK Coal Producers (or CoalPro) is the UK trade association for coal mining companies. Full members include Banks Developments, Celtic Energy, Kier Mining, Miller Argent, Hall Construction, Hargreaves Services, and Land Engineering Services.

Desire Petroleum

Desire Petroleum plc was an oil and gas exploration company headquartered in Malvern, England. It owned offshore exploration and production licences in the North Falkland Basin in the waters north of the Falkland Islands and its core focus was to develop the basin into a major new hydrocarbon province.

Desire Petroleum was acquired by Falkland Oil and Gas for £61million on 5 December 2013. Falkland Oil & Gas was itself acquired by Rockhopper Exploration plc in November 2015.


EnQuest plc is an independent United Kingdom-based petroleum exploration and production company which operates mainly in the United Kingdom Continental Shelf. EnQuest shares are included on the main list of the London Stock Exchange and the firm holds a secondary listing on Nasdaq OMX Stockholm.

Energy Institute

The Energy Institute (EI) is a UK chartered professional membership body.

Energy Retail Association

The Energy Retail Association (ERA) was a trade association which promoted the interests of electricity and gas retailers in the domestic market in Great Britain, formed in 2003. In April 2012 it merged with the Association of Electricity Producers and the UK Business Council for Sustainable Energy to become Energy UK.


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Franco-British Nuclear Forum

The first meeting of the Franco–British Nuclear Forum was held in Paris in November 2007, chaired by the Minister for Energy and the French Industry Minister. The working groups are focusing on specific areas for collaboration. A follow-up meeting on the issue in London was planned for March 2008,[1] but did not take place.[2]

Motoring taxation in the United Kingdom

Motoring taxation in the United Kingdom consists primarily of vehicle excise duty (commonly known as VED, vehicle tax, car tax, and road tax), which is levied on vehicles registered in the UK and hydrocarbon oil duty (normally referred to as fuel tax) which is levied on the fuel used by motor vehicles. VED and fuel tax raised approximately GB£32 billion in 2009, a further £4 billion was raised from the value added tax on fuel purchases. Motoring-related taxes for fiscal year 2011/12, including fuel duties and VED, are estimated that will amount to more than GB£38 billion, representing almost 7% of

total UK taxation.Road pricing in the form of congestion charges are in place in London and Durham. However these are generally viewed as usage charges rather than as tax for legal purposes although this interpretation is disputed by the USA and some other embassies in relation to the London congestion charge.

New Electricity Trading Arrangements

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Regal Petroleum

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Score Group plc

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Star Energy

Star Energy was a British onshore oil exploration company until acquired by IGas Energy in December 2011

Sunbury Research Centre

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UK Power Networks

UK Power Networks is a distribution network operator for electricity covering South East England, the East of England and London. It manages three licensed distribution networks (Eastern Power Networks PLC, South Eastern Power Networks PLC and London Power Networks PLC) which together cover an area of 30000 square kilometres and approximately eight million customers.

In 2014 UK Power Networks was awarded £25 million from the electricity regulator Ofgem's Low Carbon Networks Fund for the Low Carbon London project. In 2011 it was awarded £6.7 million by Ofgem for another project, Flexible Plug and Play, which is researching new ways, technical and commercial, to connect renewable energy to the distribution network in Cambridgeshire.

As well as the three distribution arms UK Power Networks also operates UK Power Networks Services Holdings Limited, which develops and maintains electrical networks for clients including London Underground, Heathrow and Stansted airports, Docklands Light Railway and Canary Wharf.


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Western Power Distribution

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Western Power Distribution is a subsidiary of the American utility corporation PPL.

It should not be confused with WPD, a wind farm company in north-western Europe, or Western Power Corporation, an electricity distributor in Australia.

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