Spring Statement: What is fuel duty, how much is it in the UK, and has Rishi Sunak cut fuel duty?

Rishi Sunak’s 2022 Spring Statement included a significant cut to fuel duty kicking in immediately, here’s what fuel duty is and how the cut could affect you.

Thursday, 24th March 2022, 1:21 pm
Rishi Sunak is expected to announce a fuel duty cut in today's Spring Statement. Photo: anyaberkut / Getty Images / Canva Pro.
Rishi Sunak is expected to announce a fuel duty cut in today's Spring Statement. Photo: anyaberkut / Getty Images / Canva Pro.

At the Spring Statement 2022, Rishi Sunak unveiled plans to help struggling households – vowing to “stand by” British families amid the deepening cost of living crisis.

The Chancellor’s spring statement on Wednesday linked the difficulties facing the UK economy to the cost of Russian President Vladimir Putin’s invasion of Ukraine.

On Wednesday morning it was announced that UK inflation had been set soaring higher in February.

The expected fuel duty cut is an effort to relieve fuel prices in the fact of continued cost of living increases. Photo: IngaNielsen / Getty Images / Canva Pro.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 6.2% in February, up from 5.5% in January and again reaching the highest level since March 1992, when it stood at 7.1%.

Among the measures imposed to help struggling families, Mr Sunak revealed a fuel duty cut to ease the pressure on fuel costs – but what will this mean in practice?

Here’s what fuel duty is and what the 5p fuel duty cut means for you.

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What is fuel duty?

Fuel duty is an excise duty that you pay as part of the cost of fuel whenever you fill up.

As such, it affects the price of petrol and diesel.

How much is fuel duty in the UK?

Fuel duty is levied at a rate of 57.95p per litre for petrol and diesel, with VAT added on top at a rate of 20% of the combined product price and duty.

It has been frozen at that level since March 2011.

The average cost of a litre of petrol at UK forecourts on Tuesday was 167.3p, while diesel was 179.7p, figures from data firm Experian Catalist show.

This is an increase of 18p per litre for petrol and 27p for diesel over the past month.

This is due to a number of reasons. Most recently, oil prices surged immediately after Russia’s invasion of Ukraine due to supply fears, leading to a rise in wholesale costs.

However, prices were already increasing as global economies recover from the pandemic.

Has Rishi Sunak cut fuel duty in the Spring Statement?

In Wednesday’s Spring Statement, the Chancellor announced a 5p fuel duty cut among measures intended to ease the UK’s cost of living crisis.

Rishi Sunak said the UK Government wanted people to know they will “stand by them” in dealing with rising living costs, telling MPs: “Today I can announce that for only the second time in 20 years, fuel duty will be cut.“Not by one, not even by two, but by 5p per litre. The biggest cut to all fuel duty rates – ever.“While some have called for the cut to last until August, I have decided it will be in place until March next year – a full 12 months. Together with the freeze, it’s a tax cut this year for hard-working families and businesses worth over £5 billion, and it will take effect from 6pm tonight.”

The Treasury has said the measures announced so far add up to around £21 billion of support this year, taking in the rebate, changes to Universal Credit and the freezing of fuel and alcohol duties.

How much could you save with a fuel duty cut?

A 5p cut to fuel duty could see the cost of filling a typical 55-litre family petrol car reduced by around £3, according to the RAC.

But on Tuesday (March 22) Steve Gooding, director of the RAC Foundation said data showing an 18p and 27p increase to the cost of petrol and diesel respectively over the last month demonstrated the need for a larger cut.

“These official figures show why a fuel duty cut is needed and why it should be more than the 5p per litre that has been reported,” Mr Gooding said.

“The Chancellor will have been benefiting from a rise in VAT income given the pump price increases, so he could afford to give something back to road users.

“Nor should he fear that a temporary cut in duty will lead to an increase in driving.

“With the current squeeze on household budgets, there won’t be many people rushing to do extra mileage even if there is some limited relief on the forecourts.”

Additional reporting by PA reporters.