Petrol drivers will face 69p per litre charges due to a tax cut freeze which is being phased out from later this year. Fuel duty is a tax "included in the price you pay for petrol, diesel and other fuels used in vehicles or for heating", according to the Government website.
It's currently levied at a flat rate of 52.95p per litre for petrol and diesel. After that, VAT at 20% is charged on the sum of the duty and the pre-tax pump price. Currently, fuel duty and the VAT it is subject to comes to about 64p (63.5p) per litre (not including VAT on the pump price, which isn't constant, and depends on the final sale price).
The 52.95p rate has been frozen since 2011-12 to ease cost-of-living pressures and help businesses, and includes a temporary 5p cut introduced in 2022-23.
This has been extended on a number of occasions, most recently to September 2026 in Rachel Reeves' Autumn Budget last year.
From then, the government plans to drop the 5p cut in three stages. On September 1st this year it will cut it by 1p, then by 2p on December 1 2026, before returning to pre-March 2022 levels by scrapping the remaining 2p of the cut on March 1 2027.
Under this approach, once the cut is fully phased out, the flat rate will be 57.95p, with drivers charged around 69.54p per litre based on the duty and then 20% VAT charged on top of the duty.
It means drivers will essentially be forking out an automatic 69p per litre at the pumps in tax before all the other costs are added on top, including more VAT on the final sale price.
The Office for Budget Responsibility (OBR) says fuel duties "represent a significant source of revenue for the Government".
"In 2025-26, we expect fuel duties to raise £24.4 billion. That would represent 2.0% of all receipts and is equivalent to £850 per household and 0.8% of national income," it adds.
Ms Reeves also unveiled a new pay-per-mile charge for electric cars and plug-in hybrids which will see EVs charged 3p per mile, and plug-in hybrids charged at 1.5p. However, it won't be rolled out until 2028.