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Hydrocarbon oil duty

Hydrocarbon oil duty (also fuel duty and fuel tax) is a fuel tax levied on some the price of some fuels used by most road 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 in 2009 was £25.894 billion, with a further £3.884 billion being raised from the VAT on the duty contributing some 4 per cent to the total UK tax revenues.[1] The Fuel Price Escalator, which was introduced in 1993 was abandoned after the disruptive fuel tax protests of 2000.


  • History 1
  • Rates and receipts 2
  • European comparisons 3
  • Exceptions 4
    • Aviation 4.1
    • Buses 4.2
    • Construction and farm vehicles 4.3
    • Trains 4.4
  • See also 5
  • References 6
  • External links 7


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 (£6.06 as of 2016[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 (£8.21 as of 2016[2]) per UK gallon).

In 1928, following market reductions in the cost of a UK gallon of fuel to about 1s 2½d (£3.25 as of 2016[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 (£4.2 as of 2016[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.[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

In April 2012 the UK price for petrol at €1.65 was slightly above the European average of €1.58, where prices vary between €1.31 in Romania and €1.86 in Denmark; for diesel the UK price of €1.73 is one of highest, where the average price is €1.49 and ranges from €1.34 in Romania to €1.74 in Italy).[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

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 CPI inflation numbers based on data available from Gregory Clark (2015), "The Annual RPI and Average Earnings for Britain, 1209 to Present (New Series)" MeasuringWorth.
  3. ^ a b c d "Fuel duties". 
  4. ^ "'"Gummer denies the 'great car economy. The Independent. 1994-03-20. 
  5. ^ "Budget 2012: Fuel duty increase gets go-ahead". BBC. 
  6. ^ "Government postpones planned 3p fuel duty increase". BBC. 
  7. ^ a b c "Hydrocarbon Oils: Duty Rates" (PDF). HMRC. 
  8. ^ Leroux, Marcus (2008-11-24). "Fury as fuel duty lifted 2p to offset VAT cut". London: Times Newspapers. Retrieved 2009-04-03. 
  9. ^ "And you think petrol is expensive here? Euro fuel price shock awaits holiday drivers". 
  10. ^ "UK taxpayers 'subsidise' airlines by 300 each every year".  
  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. 
  13. ^ "II. Trends in the bus industry". Hansard. 
  14. ^ "Thousands using illegal car fuel". BBC News. 2007-11-03. 
  15. ^ "Public Transport Subsidies". Hansard. 
  16. ^ "Train Operators Welcome Chancellor’s Cut In Biofuel Duty".  

External links

  • Hydrocarbon Oil Duties Act 1979
  • Hydrocarbon Oils Duty Rates UK HM Revenue & Customs website
  • Hydrocarbon Oils: Customs Duty UK HM Revenue & Customs website
  • 2011 Hydrocarbon Oil Duty Rates UK HM Revenue & Customs website
  • You think fuel prices are bad? Historically, they're not - and we've graphed it
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