Latest data has revealed that revenue taken in fuel duty has seen a significant decline.
As a result, the government will need to look at putting in a new plan to help make up for this lost revenue.
Lowest level in a decade
Figures from ‘HMRC tax receipts and National Insurance contributions for the UK’ show that Hydrocarbon Oil Duty brought in just over £2 billion last month.
This is a drop of nearly £50 million (2.4%) compared to August 2024, and £500 million lower than August 2023 (21.5%).
In 2024/25, this levy raised £24.3 billion, which is the lowest level since 2006/07 – not including 2020/21 when travel was drastically impacted by the pandemic.
Government will need to put a plan in place
The ATT highlights that due to more motorists choosing electric vehicles, which do not require a fuel duty charge, the government will need to put a plan in place sooner rather than later.
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Jon Stride, chair of the ATT’s Technical Steering Group, explained, “Fuel duty currently raises nearly £25 billion a year, but successive freezing of fuel duty means it hasn’t been increased for over 12 years. VAT is charged on the duty-inclusive price of fuel, so VAT revenues would have been boosted by any increase as well.
“However, the growing number of people using electric cars means any increased tax take from raising fuel duty is only likely to be temporary. Replacements will need to be considered, such as increasing taxes on electric vehicles or even mileage pricing, with drivers taxed based on how far they drive in a year.
“Whatever happens to fuel duty in the future, the government needs to urgently address how they will replace fuel duty in a post-petrol and diesel world if revenue levels are to be maintained.”
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