Why UK fuel is expensive: fuel duty frozen for 14 years, but VAT still applies
UK fuel duty was frozen at 52.95 pence per litre in March 2011 and has been repeatedly extended. After 14 years of freezes, this is sometimes cited as a saving for drivers, but VAT at 20% still applies on top of the total price including duty. At a pump price of ~145p/litre, roughly 65% is tax. The duty freeze means UK fuel is cheaper than it would otherwise be, but still 2-3x the US price because American fuel duty is ~15-20% of the pump price.
UK pump price breakdown (petrol, indicative)
| Component | Amount approx. | % of price |
|---|---|---|
| Crude + refining + distribution | ~50p/L | ~34 % |
| Fuel duty | ~53p/L | ~36 % |
| VAT 20% | ~43p/L | ~30 % |
| Pump price | ~146p/L | 100 % |
ℹ️ Fuel prices updated daily, Source: RAC (rac.co.uk/drive/advice/fuel-watch) and AA (theaa.com/fuel-prices). Current fuel duty on gov.uk/guidance/fuel-tax-rates-and-fuel-tax-penalties.
Global fuel price comparison
| Country | Tax share | Avg. petrol price |
|---|---|---|
| UK | ~65 % | ~£1.46/L |
| Germany | ~58 % | ~£1.50/L equivalent |
| Norway | ~60 % | ~£1.90/L (very high) |
| USA | ~15-20 % | ~£0.75/L equivalent |
| Australia | ~35 % | ~£1.05/L equivalent |
| Saudi Arabia | subsidised | ~£0.20/L |
HMRC mileage allowance for business use
If you use your personal vehicle for work, HMRC's Approved Mileage Allowance Payments (AMAP) let you claim tax-free:
- Cars and vans: 45p/mile for the first 10,000 miles per year, 25p/mile above that
- Motorcycles: 24p/mile
- Bicycles: 20p/mile
If your employer pays less than this rate, you can claim the difference as a tax deduction. If they pay more, the excess is taxable income.
ℹ️ AMAP rates set by HMRC, current rates at gov.uk/expenses-and-benefits/business-travel-mileage. Rates can change with each Budget.