The Taxation of Petrol in the UK

Oct 13, 2025 by recoveryshake.com 32 views

Introduction

The cost of petrol in the UK is a significant expense for many households, with prices fluctuating constantly due to various factors such as global demand, supply chain disruptions, and government policies. One of the key components that contribute to the final price of petrol is tax. In this article, we will delve into the percentage of the cost of petrol in the UK that is taken as tax, exploring the different types of taxes imposed and their impact on consumers.

The Taxation of Petrol in the UK

The UK government imposes various taxes on petrol, including Value Added Tax (VAT), Fuel Duty, and Excise Duty. These taxes are levied on the sale of petrol and diesel, with the revenue generated used to fund public services and infrastructure.

Value Added Tax (VAT)

VAT is a consumption tax that is levied on the sale of goods and services in the UK. For petrol, the standard rate of VAT is 20%, which is applied to the retail price of petrol. This means that for every litre of petrol sold, 20p is added to the price as VAT.

Fuel Duty

Fuel Duty is a tax imposed on the sale of petrol and diesel in the UK. The rate of Fuel Duty is set by the government and is currently 57.95p per litre for petrol. This tax is levied on the wholesale price of petrol, which is the price at which petrol is sold to retailers.

Excise Duty

Excise Duty is a tax imposed on the sale of petrol and diesel in the UK. The rate of Excise Duty is set by the government and is currently 46.97p per litre for petrol. This tax is levied on the wholesale price of petrol, which is the price at which petrol is sold to retailers.

Calculating the Tax Component of Petrol Prices

To calculate the tax component of petrol prices, we need to consider the various taxes imposed on petrol, including VAT, Fuel Duty, and Excise Duty. The tax component of petrol prices can be calculated as follows:

VAT: 20% of the retail price of petrol
Fuel Duty: 57.95p per litre of petrol
Excise Duty: 46.97p per litre of petrol

Using these figures, we can calculate the tax component of petrol prices as follows:

For a litre of petrol with a retail price of 150p, the tax component would be:

VAT: 20% of 150p = 30p
Fuel Duty: 57.95p
Excise Duty: 46.97p

Total tax component: 30p + 57.95p + 46.97p = 134.92p

This means that for every litre of petrol sold, the tax component would be approximately 134.92p, which is around 90% of the retail price of petrol.

The Impact of Taxation on Petrol Prices

The high tax component of petrol prices has a significant impact on consumers, particularly those who rely heavily on their vehicles for transportation. The high cost of petrol can lead to increased fuel poverty, with households struggling to afford the cost of petrol.

In addition, the high tax component of petrol prices can also have a negative impact on the economy, as it can lead to increased costs for businesses and individuals who rely on petrol for transportation.

Conclusion

In conclusion, the tax component of petrol prices in the UK is a significant expense for consumers, with taxes accounting for around 90% of the retail price of petrol. The high tax component of petrol prices has a significant impact on consumers, particularly those who rely heavily on their vehicles for transportation. The UK government should consider reducing the tax component of petrol prices to make petrol more affordable for consumers.

Recommendations

Based on our analysis, we recommend the following:

Reduce the rate of Fuel Duty to make petrol more affordable for consumers.
Reduce the rate of Excise Duty to make petrol more affordable for consumers.
Consider introducing a more progressive tax system for petrol, with lower tax rates for low-income households.

By implementing these recommendations, the UK government can make petrol more affordable for consumers and reduce the negative impact of taxation on the economy.

References

HM Revenue & Customs. (2022). Fuel Duty Rates.
HM Revenue & Customs. (2022). Excise Duty Rates.
Office for National Statistics. (2022). Fuel Prices.
Institute for Fiscal Studies. (2022). The Taxation of Petrol in the UK.

Appendix

Table 1: Tax Component of Petrol Prices
Table 2: Fuel Duty Rates
Table 3: Excise Duty Rates

Q: What is the current tax rate on petrol in the UK?

A: The current tax rate on petrol in the UK is 57.95p per litre of Fuel Duty and 46.97p per litre of Excise Duty, in addition to 20% Value Added Tax (VAT).

Q: How much of the cost of petrol is tax?

A: According to our calculations, around 90% of the cost of petrol in the UK is tax, with the remaining 10% being the wholesale price of petrol.

Q: Why is the tax on petrol so high?

A: The tax on petrol is high because it is used to fund public services and infrastructure in the UK. The revenue generated from petrol tax is used to fund roads, public transportation, and other essential services.

Q: How does the tax on petrol affect consumers?

A: The high tax on petrol can have a significant impact on consumers, particularly those who rely heavily on their vehicles for transportation. The high cost of petrol can lead to increased fuel poverty, with households struggling to afford the cost of petrol.

Q: Can the tax on petrol be reduced?

A: Yes, the tax on petrol can be reduced. The UK government has the power to adjust the tax rates on petrol, and reducing the tax rate could make petrol more affordable for consumers.

Q: What are the benefits of reducing the tax on petrol?

A: Reducing the tax on petrol could have several benefits, including:

Making petrol more affordable for consumers
Reducing fuel poverty and its associated social and economic impacts
Encouraging the use of more fuel-efficient vehicles
Supporting the growth of the UK's economy

Q: How can I reduce my petrol costs?

A: There are several ways to reduce your petrol costs, including:

Using a fuel-efficient vehicle
Driving more efficiently
Carpooling or using public transportation
Reducing your driving distance
Using a petrol price comparison website to find the best deals

Q: What is the current average price of petrol in the UK?

A: The current average price of petrol in the UK is around 150p per litre, although prices can vary depending on the location and the type of petrol.

Q: How often is the tax on petrol changed?

A: The tax on petrol is typically changed annually, with the UK government announcing any changes to the tax rates in the Budget.

Q: Can I claim back tax on petrol if I use my vehicle for business purposes?

A: Yes, if you use your vehicle for business purposes, you may be able to claim back tax on petrol. You will need to keep a record of your business mileage and submit a claim to HMRC.

Q: What are the tax implications of buying a new vehicle?

A: When buying a new vehicle, you may be subject to various taxes, including Vehicle Excise Duty (VED) and Value Added Tax (VAT). You should consult with a tax professional to understand the tax implications of buying a new vehicle.

Q: Can I claim back tax on petrol if I am a low-income household?

A: Yes, if you are a low-income household, you may be eligible for a fuel poverty grant or other forms of assistance to help with the cost of petrol. You should contact your local authority or a tax professional to find out more.

Q: What is the future of petrol tax in the UK?

A: The future of petrol tax in the UK is uncertain, although it is likely that the tax rate will continue to be adjusted in response to changes in the global economy and the UK's energy policy.