Chancellor Rachel Reeves has confirmed a tax handout for nine groups of drivers, extending the temporary 5p fuel duty cut until January 2027. The announcement follows a Labour Party update two weeks ago.
Fuel Duty Freeze Extended
HMRC has confirmed that the fuel duty rate cut, first introduced in March 2022, will remain in place until the end of 2026. The 5p freeze will continue for the rest of the calendar year, with the government estimating that the extension will save the average driver around £120 since 2025. Fuel duty on petrol and diesel will stay at its lowest level for more than 16 years.
Prime Minister Sir Keir Starmer said: "I know many are feeling the pressure of energy and fuel costs, and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first. That’s why this government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people."
Nine Groups Affected
HMRC says the groups affected will be: manufacturers, importers, distributors, retailers, household consumers of petrol, business consumers of petrol, household consumers of diesel, business consumers of diesel, and users of other fuel products subject to fuel duty.
HMRC explained: "This measure extends the temporary 5 pence per litre (ppl) cut in the rates of fuel duty, first introduced at Spring Statement in March 2022, until the end of August 2026, avoiding a 5 ppl increase in March 2026 when the cut was due to expire."
The main fuel duty rates will be increased by 1 ppl on 1 September 2026, 2 ppl on 1 December 2026, and 2 ppl on 1 March 2027. This will gradually reverse the cut and return to the rates before March 2022. Fuel duty rates for rebated and lower taxed fuels will also increase by the equivalent proportion of the temporary cut. The planned increase in line with inflation for 2026 to 2027 will not take place.
