Every time you fill up, you're paying more in tax than you are for actual fuel.
How Fuel Is Taxed in the UK
When you pay £1.40 for a litre of petrol:
- Fuel Duty: 52.95p (38%)
- VAT (20%): ~23p (17%)
- Product Cost: ~52p (37%)
- Retailer Margin: ~12p (8%)
Approximately 55% of the pump price is tax.
What Is Fuel Duty?
A fixed tax of 52.95p per litre on both petrol and diesel. This is the "reduced rate" after a 5p cut in March 2022.
Wait, There's VAT Too?
Yes, and VAT is applied to the total price including fuel duty. You're paying tax on a tax.
Why Is Fuel Duty So High?
It raises approximately £25-28 billion per year. Politicians are reluctant to cut it because:
- It's a major revenue source
- It discourages driving (environmental goals)
- It's "hidden" – no annual statement
UK vs Other Countries
- UK: 52.95p + VAT
- Germany: ~47p equivalent
- Spain: ~35p equivalent
- USA: ~4-8p equivalent
The Bottom Line
You can't avoid fuel duty. But you can avoid overpaying for the actual fuel – compare prices and make sure retailers aren't taking an excessive margin on top of the tax.