Hydrocarbon oil duty
Hydrocarbon oil duty (also fuel duty and fuel tax) is a fuel tax levied on some fuels used by most road motor 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 was £27.1 billion for the financial year 2014-2015. This is an increase in cash terms in comparison to 2013-2014 but now only represents 1.5% of GDP. This is in contrast to the start of the 2000s when it was 2.3% of GDP. A further £3.9 billion is raised from the VAT on the duty, contributing some 3.5 per cent of total UK tax revenues. The Fuel Price Escalator, which was introduced in 1993 was abandoned after the disruptive fuel tax protests of 2000.
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, after which the cost of petrol was about 4s (equivalent to £8.29 in 2015) per UK gallon.
In 1928, following market reductions in the cost of a UK gallon of fuel to about 1s 2½d (equivalent to £3.28 in 2015), the Government introduced a tax of 4d (£0.017) per UK gallon bringing the cost of a UK gallon of petrol to 1s 6¾d (equivalent to £4.24 in 2015).
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. 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. A planned 3.02p/litre rise which was confirmed by the 2012 United Kingdom budget to come into effect on 1 August 2012 was later deferred until 1 January 2013 at short notice. The last increase in Fuel duty occurred in 2010. Taxation currently accounts for 75% of the total price of fuel at 99.7ppl.
Rates and receipts
The rates since 23 March 2011 have been as follows:
|Petrol, diesel, biodiesel, bioethanol||£0.5795||per litre|
|Natural gas used as road fuel (inc biogas)||£0.2615||per kg|
|Road fuel gas other than natural gas||£0.3304||per kg|
VAT at the current rate is then added to the total price. 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).
The UK average petrol price as of 11th January 2016 is £1.01 per litre. This is slightly above the European average but is 30p lower than the peak in 2014. With declining oil prices, it has been suggested petrol could fall to 86.9p per litre if oil prices fall to $10 a barrel. Average diesel prices are currently £1.03 per litre. The minimum petrol price available is 99.7p and £1.03 for diesel. The minimum across Europe is 87.9.
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.
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.
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.
UK train operators are required pay full duty rates with the exception of biofuels, for which the duty was reduced from 53p to 8p in 2006 and for electrified services.
- Road pricing in the United Kingdom
- Motoring taxation in the United Kingdom
- Fuel tax (for international comparisons)
- United Kingdom National Accounts: The Blue Book (Report). Office for National Statistics. 2010.
- UK CPI inflation numbers based on data available from Gregory Clark (2016), "The Annual RPI and Average Earnings for Britain, 1209 to Present (New Series)" MeasuringWorth.
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- "The Chancellor could find himself in a bit of pickle...". BBC.
- "Hydrocarbon Oils: Duty Rates" (PDF). HMRC.
- Leroux, Marcus (2008-11-24). "Fury as fuel duty lifted 2p to offset VAT cut". London: Times Newspapers. Retrieved 2009-04-03.
- "UK taxpayers 'subsidise' airlines by 300 each every year". Friends of the Earth.
- "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.
- "Bus Service Operators Grant (BSOG) rates in England" (PDF). Department for Transport.
- "II. Trends in the bus industry". Hansard.
- "Thousands using illegal car fuel". BBC News. 2007-11-03.
- "Public Transport Subsidies". Hansard.
- "Train Operators Welcome Chancellor's Cut In Biofuel Duty". Association of Train Operating Companies. 6 December 2006. Archived from the original on 2008-06-04.
- 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