HM Revenue & Customs (HMRC) has confirmed an extension of the temporary 5p per litre (ppl) fuel duty cut until January 2027, following a recent update by Labour Party Chancellor Rachel Reeves. The reduction, initially introduced in March 2022, will remain in effect through the rest of 2026, helping to keep petrol and diesel costs at their lowest levels in over 16 years.
This extension is projected to save the average driver approximately £120 from 2025 onwards. The government estimates that this relief will ease financial pressure amid rising global energy prices and economic uncertainty.
Prime Minister Sir Keir Starmer emphasized the importance of the measure: “We recognize the challenges working people face with energy and fuel costs, especially with ongoing global conflicts impacting prices. This government is committed to keeping fuel affordable for millions and supporting household budgets.”
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HMRC outlines that the fuel duty relief affects nine specific groups: 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 duty.
The temporary 5p cut, which was scheduled to expire in March 2026, will now be phased out gradually. Fuel duty rates will increase by 1p on September 1, 2026, followed by a 2p rise on December 1, 2026, and another 2p increase on March 1, 2027, ultimately returning to pre-March 2022 levels.
Additionally, similar proportional increases will apply to rebated and lower-taxed fuel categories. Notably, the planned inflation-linked fuel duty rise for 2026-2027 will not proceed, maintaining some relief for consumers during the transition period.