Fuel duty frozen

In a surprising turn of events, Labour’s first budget in 14 years has frozen fuel duty – despite previous expectations that it could rise by up to 10p a litre.

Chancellor Rachel Reeves decided against hiking fuel duty, saying that this would be “the wrong choice for working people” during the ongoing cost-of-living crisis.

“It would mean fuel duty rising by 7p per litre. So I have decided today to freeze fuel duty next year and I will maintain the existing 5p cut for another year too. There will be no higher taxes at the petrol pumps next year,” she said.

The RAC has welcomed the news. Simon Williams, RAC head of policy, said drivers would “breathe an enormous sigh of relief” given the previous speculation about the 5p cut being scrapped.

What is fuel duty?

Fuel duty is a tax included in the price we pay for petrol and diesel.

Since March 2011, it’s been frozen at 57.95p a litre. Oil prices spikes in 2022 after the Russia-Ukraine conflict, leading to a temporary 5p cut in the levy.

Jeremy Hunt extended this cut in March, keeping fuel prices below the frozen rate.

The RAC estimates that the 5p discount costs the Treasury around £2bn every year.

But the freeze on fuel duty means that drivers could save about £60 a year, according to the Treasury.

Any hikes to the levy would hit lower-income drivers the hardest as they spend more of their income on petrol or diesel, so they’ll likely welcome the freeze.

Does this mean petrol prices won’t go up?

Not exactly. Fuel duty is only one part of the reason prices at the pump go up or down. Prices can still change. It simply means drivers won't have to pay extra tax on fuel.

Save money on fuel

Here are some simple tips to help you save on fuel costs:

• Use price comparison sites like PetrolPrices, carwow.co.uk or Confused.com to find the cheapest fuel. The RAC offers a real-time fuel tracker too.
• Try filling up at different times or on different days. Weekends tend to be pricier due to higher demand.
• Join a loyalty scheme. Many fuel retailers, like Shell Go+, Texaco Star, BPME, Tesco Fuel Clubcard, and Esso Nectar, offer ways to save on petrol and diesel.