Fuel duties are levied on purchases of petrol, diesel and a variety of other fuels. They represent a significant source of revenue for government. In our latest forecast, we expect fuel duty to raise £27.9 billion in 2016-17. That would represent 3.9 per cent of all receipts and is equivalent to £1,000 per household and 1.4 per cent of national income.
Fuel duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel and other fuels used in vehicles or for heating. The rate depends on the type of fuel:
- the headline rate on standard petrol and diesel has been frozen since 2011-12 at 57.95 pence per litre. This also applies to biodiesel and bioethanol;
- the rate on liquefied petroleum gas is 31.61 pence per kilogram;
- the rate on natural gas used as fuel in vehicles (e.g. biogas) is 24.70 pence per kilogram; and
- the rate on ‘fuel oil’ burned in a furnace or used for heating is 10.70 pence per litre.
VAT is applied after fuel duty, so, for example, the pump price of a litre of petrol currently reflects the pre-tax price plus 57.95p for fuel duty plus 20 per cent VAT on the pre-tax price and a further 11.59p for VAT at 20 per cent on fuel duty.