FAQs about motoring taxation and cost of running a car

A2) The RAC Foundation estimates that since the conflict in Iran started on 28 February 2026, drivers have paid more than £3 billion more for their petrol and diesel than they might have expected to pay if forecourt prices had remained where they were before war broke out.

Calculations use average fuel consumption figures from 2025 and daily pump prices since the war began.

About three quarters of this premium has been footed by those with diesel vehicles, reflecting the fact that more diesel than petrol is sold in the UK and that the average price of a litre of diesel is around 26p higher than that of petrol.

Of the £3.03 billion, £505 million has gone to the Exchequer in windfall VAT payments, though some of that amount will later be reclaimed by VAT-registered businesses.

The war premium total is currently rising by around £50 million per day.

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Q3) What is the current price of petrol and diesel excluding VAT and Fuel Duty?

A3) Fuel duty is currently levied at a flat rate of 52.95p per litre for both petrol and diesel, while VAT at 20 per cent is then charged on both the product price and the duty.

Figures supplied by the Department for Energy Security & Net Zero show that in April 2026, the average price of a litre of premium unleaded petrol was 158.34p.

The price per litre, excluding VAT, was 131.95p and the price, excluding both VAT and Fuel Duty, was 79.00p.

The average price of a litre of diesel petrol was 192.40p. The price per litre, excluding VAT, was 160.33p and the price, excluding both VAT and Fuel Duty, was 107.38p.

For historic data on fuel prices, Fuel Duty and VAT see here (DES & NZ data).

The current percentage of the pump price that is Fuel Duty and VAT can be viewed here in the interactive data section of our website.

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Q4) What is the historic percentage of the fuel price that has been taxation since 2012?

A4) This interactive chart shows how taxation on petrol and diesel (Both Fuel Duty and VAT) has changed as a proportion of the pump price since 2012.

Hover over the chart to see exact values.

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Q5) What is the cost of filling up an average car?

A5) A chart tracking the cost back to May 2012 based on a Ford Focus with 55 litre tank can be viewed here.

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Q6) What are the record high prices for the cost of petrol and diesel?

A6) Unleaded petrol hit a new record high of 191.43p/litre on 1 July 2022.

Diesel also hit a new record high of 199.05p/litre on 1 July 2022.

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Q7) How does the wholesale (at the refinery gate) price of petrol and diesel compare with the retail (pump) price?

A7) A chart showing both the wholesale (at the refinery gate) price of petrol and diesel and the retail (pump) price can be viewed here.

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Q8) Why is diesel more expensive than petrol?

A8) Fuel costs depend on production and tax. As both petrol and diesel are subject to the same fuel duty and VAT, the difference in price is down to supply and production particularly as regards the import costs and formulation of diesel.

UK refineries have long struggled to meet demand for diesel, forcing the UK to rely on overseas imports. As diesel fuel has larger molecules than petrol, it is a heavier material to transport and this increases its import prices.

Diesel is also more complex to produce than petrol. Its refinement process requires a number of complex additives to be added. This process can be quite intricate, time-consuming and expensive and so further drives up costs.

Fuel prices are also particularly sensitive to the principles of supply and demand. Global geopolitical events, economic shifts, and seasonal production and consumption variations influence the availability and cost of crude oil. The gap between unleaded and diesel can particularly widen during the winter as the end of the US “driving season” means retailers have a surplus of petrol they cannot export, so they sell it here at a lower price. Meanwhile, diesel demand increases across continental Europe, where the fuel is commonly used in heating oil and this extra demand for heating fuel pushes the price of diesel up.

The issue is also explored in the House of Commons Library Briefing Paper 4712.

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Q9) What is the historical and current price difference between petrol and diesel?

A9) A chart that plots the price difference between petrol and diesel in the UK using government data going back to 2003 can be viewed here.

Diesel is, on average, now costing about 33p per litre more than petrol.

The gap is the largest it has been since at least 2003.

The previous largest gap according to data going back 23 years was 24.7p back in November 2022 after the Russian invasion of Ukraine.

Diesel always tends to be more expensive than petrol but the difference has increased rapidly partly because the UK tends to import a lot of diesel – rather than refine it here – and hence is directly hit by global price fluctuations caused by the war in Iran.

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Q10) What are the elements that make up the price of a litre of petrol or diesel?

A10) There are a number of elements that make up the price of a litre of petrol or diesel. These primarily consist of:-

The wholesale cost of petrol or diesel, determined by the price of oil. Oil is sold in US dollars so the strength of the pound also plays a role
Government duty and tax
the costs and profit of the wholesaler and retailer. This covers the costs of transport to a storage terminal/depot; storage and distribution to a filling station; marketing and promotion costs; and retailer profit margins.

While some of these will remain largely the same – such as the fuel duty rate and VAT – others such as the oil price and dollar to sterling exchange rate can be very volatile. This explains why prices rise and fall. A combination of high oil prices and a weak pound leads to the highest pump prices.

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Q11) What is the current and historical rate of Fuel Duty?

A11) The current Fuel Duty rate is 52.95 pence per litre.

In Budget 2025, the Chancellor announced that the government is extending the temporary 5p fuel duty cut for a further five months, with the cut being reversed in three stages:- 1p on 1 September 2026, 2p on 1 December 2026 and 2p on 1 March 2027. This will return rates to pre-March 2022 levels. The planned inflation increase for 2026-27 will not take place, with the government uprating fuel duty rates by Retail Prices Index (RPI) from April 2027.

NOTE: The government announced on 20 May that the 5p cut on fuel duty will be extended for the rest of the year.

Historical rates since 2001 are shown below.

Unleaded and Diesel:-

Duty rate per litre from 7 March 2001 45.82p
Duty rate per litre from 1 October 2003 47.10p
Duty rate per litre from 7 December 2006 48.35p
Duty rate per litre from 1 October 2007 50.35p
Duty rate per litre from 1 December 2008 52.35p
Duty rate per litre from 1 April 2009 54.19p
Duty rate per litre from 1 September 2009 56.19p
Duty rate per litre from 1 April 2010 57.19p
Duty rate per litre from 1 October 2010 58.19p
Duty rate per litre from 1 January 2011 58.95p
Duty rate per litre from 23 March 2011 57.95p
Duty rate per litre from 23 March 2022 52.95p

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Q12) Does the UK have the most expensive petrol prices in Europe?

A12) Contrary to popular myth, the UK does not have the most expensive petrol prices in Europe. Click here to see where we rank.

However, historically the position has been different when it comes to diesel where we have been historically one of the most expensive countries in Europe. Click here to see where we rank.

Source: www.energy.eu

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Q13) What is the proportion of the pump price that is tax in the United Kingdom and EU countries?

A13) This chart plots the pre-tax cost of unleaded petrol in the United Kingdom and each of the 27 EU member countries against the proportion of tax in the final pump price.

This chart plots the pre-tax cost of diesel against the proportion of tax in the final pump price.

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Q14) How is the price of crude oil set?

A14) The price of crude oil is driven by a number of factors. These include:-

Production capacity – Global supply of crude oil has grown more slowly than demand in the last decade. This is the result of a variety of factors including slowing production capacity of non-OPEC countries due to depleting oil fields (North Sea Continental Shelf for example) and interruptions to supply as a result of geopolitical tensions, such as the Arab Spring.

Organization of the Petroleum Exporting Countries (OPEC) – Founded in 1960, OPEC is an intergovernmental organisation that has the objective of safeguarding the interests of oil producing countries around the world. According to current estimates, 79.4 per cent of the world’s proven oil reserves are located in OPEC Member Countries and in 2018 it produced about 42 per cent of the world’s total supply of crude oil. There are currently 13 member countries and these countries meet at least twice a year to discuss oil market fundamentals and set a crude production ceiling for the following price revision period. OPEC therefore has the potential to influence on international crude oil prices by increasing or decreasing its oil production capacity.

Inventories – Inventories can influence and also reflect the market perception of short-term demand/supply and therefore can have an impact on future oil prices. Crude and petroleum product inventories serve to balance the impact of potential supply disruptions in the short term. Where inventories are low, markets can be more sensitive to actual or perceived supply disruptions or demand fluctuations.

Crude oil reserves – The extent of proven reserves relative to demand can have an impact on the market’s perception of the long-term balance of demand and supply and therefore can affect future prices.

US dollar exchange rates – All crude is traded in the US dollar and therefore the strength of the currency has an impact on oil prices. A weaker US dollar leads to lower oil prices in non-dollar denominated countries. This can increase demand, which in turn may push up oil prices.

Other factors – Oil exploration and production costs can have an impact on supply of crude oil as can investment in production capacity and weather conditions. In addition, market sentiment itself can have an impact on prices.

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Q15) What is the current price of a barrel of Brent crude oil?

A15) The very latest oil price is available in the interactive data section of our website.

Here you can also find the price of Brent crude since May 2012 both in US dollars and pound sterling.

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Q16) What is the record price of a barrel of Brent crude oil?

A16) On 11 July 2008, a barrel of Brent crude oil hit an all-time high of 148 US dollars.

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Q17) How much does it cost to charge an electric car?

A17) Essentially, electric vehicles (EVs) can be very cheap to run. However, this largely depends on where you charge them. As a general rule, charging an EV at home is far cheaper than fuelling a petrol or diesel car but the cost is much closer when it comes to public charging.

It is much cheaper to charge an EV at home than to use a public charging facility. To fully charge an EV at home can cost between £4 and £20 depending on your tariff and the size of your car’s battery. However, to charge an EV to 80 per cent at a public rapid charger will be substantially more expensive – particularly if you’re using the fastest rapid chargers. For EVs with the biggest batteries it could cost over £60 for a 10 – 80 per cent charge.

The RAC has a very helpful guide on how EV charging works and how much it costs. The guide can be viewed here. The RAC’s specific guide on EV charging prices at public chargers can also be viewed here.

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Q18) Will drivers of electric cars have to pay a mileage charge in future?

A18) Yes. The government is introducing Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, with effect from April 2028. Drivers will pay for their mileage alongside their existing VED.

In Budget 2025, the government said that all vehicles contribute to congestion and wear and tear on the roads but whilst drivers of petrol and diesel vehicles pay fuel duty at the pump to contribute their fair share towards their usage, drivers of electric vehicles (EVs) do not currently pay an equivalent. This means that, as more people choose to switch to cleaner, greener electric cars, the Office of Budget Responsibility (OBR) has forecast fuel duty receipts will decline to around half current levels (around £12 billion) in the 2030s in real terms. Receipts are then expected to approach zero by 2050. The government is therefore introducing eVED, a new mileage charge for electric and plug-in hybrid cars.

Whilst the government has said it is fair for EV drivers to contribute for their car usage in the same way as those driving petrol and diesel cars, it has also said it is committed to ensuring that driving an EV remains an attractive choice for consumers. Therefore, the tax paid by EV drivers will be around half the fuel duty rate paid by the average petrol/ diesel driver, with a reduced rate for plug-in hybrid drivers. When eVED takes effect in April 2028, an average EV driver will pay around £240 per year or £20 per month. Other vehicle types, such as vans, buses, motorcycles, coaches and HGVs, will be out of scope of eVED when it is introduced, with the transition to electric power for these vehicle types being currently less advanced than for cars.

The government has published a consultation which provides further detail on how eVED will work and seeks views on its implementation. This consultation closed on 18 March 2026.

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Q19) What was announced in Budget 2025?

A19) In Budget 2025, the Chancellor announced that the government is extending the temporary 5p fuel duty cut for a further five months, with the cut being reversed in three stages:- 1p on 1 September 2026, 2p on 1 December 2026 and 2p on 1 March 2027. This will return rates to pre-March 2022 levels. The planned inflation increase for 2026-27 will not take place, with the government uprating fuel duty rates by Retail Prices Index (RPI) from April 2027.

Other changes that were announced included:-

the introduction of the Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will come into effect from April 2028. Drivers will pay for their mileage alongside their existing VED.
an additional £1.3 billion funding for the Electric Car Grant with funding extended to 2029-30
an increase in the threshold at which motorists with new electric vehicles have to pay the VED Expensive Car Supplement from £40,000 to £50,000, with effect from 1 April 2026
allocating £100 million to local authorities and public bodies to accelerate installation of chargepoints where people live and work.
Vehicle Excise Duty rates for cars, vans and motorcycles uprated in line with RPI from 1 April 2026.
by 2029-30, the government will commit over £2 billion annually for local authorities to repair, renew and fix potholes on their roads
from Spring 2026, UK consumers being able to compare prices more easily through the Department for Energy Security and Net Zero’s open data Fuel Finder scheme, encouraging competitive pricing among retailers

Full details can be viewed in Budget 25.

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Q20) How much do motorists pay in direct motoring taxes and what are the other taxes and charges motorists may have to pay?

A20) The taxes that are most directly linked to motoring are Vehicle Excise Duty (VED) and Fuel Duty. Latest figures show that in 2023/24, VED generated around £7.8 billion (up from 7.3 billion in the previous financial year and the highest amount ever raised) and Fuel Duty about £24.8 billion. This was down from £25.1 billion in the previous financial year and was down about 3.2 billion from the amount raised in 2018/19.

Fuel Duty revenue more than tripled between 1987 and 2010. The revenue raised then remained around the £27/28 billion level until the 2019/20 financial year. The amount raised in 2020/21 – £20.9 billion – was, of course, affected by the coronavirus (COVID-19) pandemic in the UK but since then, the amounts raised have fallen from £25.9 billion in 2021/22 to £24.8 billion in 2023/24.

In 2023/24, these two direct motoring taxes raised about 3 per cent of all taxes and duties collected in the UK.

Source: DfT Table TSGB1310

Motoring taxes apart, the public road system is generally free to use, with a few exceptions.

In London and Durham, congestion charges are levied; in London and a number of other cities clean air schemes are now in place and you might need to pay to drive in a clean air zone if your vehicle does not meet emissions standards; there are 20 tolls, or toll roads, in the UK, 18 of which are river crossings; and, in addition, Nottingham imposes a Workplace Parking Levy on employers who provide workplace parking.

In addition to specific road user taxes, some transport expenditure is liable to VAT. For private households, this can include expenditure on purchasing and running motor vehicles. In addition to purchasing vehicles and fuel, road users also buy other motoring-related goods and services that are subject to VAT. VAT is also payable on Fuel Duty.

VAT is not paid on insurance premiums, as there is a separate Insurance Premium Tax (IPT). The standard rate of IPT on motor insurance is 12 per cent, although a higher 20 per cent rate may apply if insurance is arranged directly through a vehicle dealership, rather than an insurer.

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Q21) How much is spent on roads?

A21) Latest figures show that in 2023/24, about £13.1 billion was spent on national and local roads in the United Kingdom.

This is about 1.3 billion more than was spent in the previous financial year.

Source: DfT Table TSGB1303

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Q22) Is the amount of revenue raised by Fuel Duty from cars likely to decline in future?

A22) Yes. RAC Foundation analysis in 2022 shows that the Chancellor could face losing almost a third of the revenue the government gets from fuel duty from cars before the end of the decade because of the move to green motoring.

In 2019, (pre-pandemic) income from fuel duty was £28 billion with £16.4 billion (58.6 per cent) derived from the 32.9 million cars on the UK’s roads at the time. However, our analysis shows that under an optimistic scenario for the future take up of EVs the £16.4 billion figure could be cut to £11.4 billion (a £5 billion or 30.5 per cent reduction) by the middle of 2028.

However, the blow to the public finances – caused by the collapse in the sale of new diesel cars and the growing popularity of electric vehicles (EVs) – is likely to be cushioned by a short-term rise in the number of petrol and plug-in hybrid cars on the road caused by drivers switching away from diesels but not straight to EVs. This pursuit of petrol could lead to the amount of fuel duty derived from the use of petrol-powered cars actually going up in the short term.

The modelling work used different input values for eleven different parameters including:

The rate of EV take up
Annual driven mileage
The rate of vehicle departure from the national vehicle parc
New car sales
Changes in fuel-economy performance

The table below shows, for a range of years, and under different scenarios, how much less fuel duty will be collected on an annual basis.

	Point at which £5bn is forecast to be lost from fuel duty income from cars under a range of scenarios
	High take up of battery-electric cars	Medium take up of battery electric cars	Low take up of battery electric cars
2028	£5bn	£2.8bn	£0.7bn
2031	£7.5bn	£5bn	£2.7bn
2033	£9.4bn	£7.4bn	£5bn

The modelling does not look at potential changes to income from fuel duty from other vehicle types including vans, lorries and buses.

Source: RAC Foundation: Fuel Duty Decline

NOTE: In Budget 2025, the Office of Budget Responsibility (OBR) forecast fuel duty receipts will decline to around half current levels (around £12 billion) in the 2030s in real terms. Receipts are then expected to approach zero by 2050. The government has therefore announced it will introduce an Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, with effect from April 2028. Drivers will pay for their mileage alongside their existing VED. (See question 18 above).

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Q23) Could there be a change in the way motorists are charged for using the roads?

A23) The projected fall in income from VED and Fuel Duty has led to the government announcing it will introduce an Electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, with effect from April 2028. Drivers will pay for their mileage alongside their existing VED.

Previous research also suggested that there could be a change in which all motorists are charged for using the roads. One possibility was outlined in the Miles Better report which won The 2017 Wolfson Economics Prize. This report was contributed to by the RAC Foundation.

Under this proposal both Fuel Duty and VED would be abolished. Instead there would be a single per-mile charge, the rate of which would depend on a vehicle’s weight (hence taking into account the damage it does to the road) and its tailpipe emissions. The lighter and cleaner a vehicle is, the lower the per mile charge. The heavier and dirtier the vehicle is, the higher the per mile charge.

The Transport Committee’s report on road pricing also concluded that there is no “viable alternative” to road pricing, based on telematics, if the chancellor wants to continue to tax motorists as revenue from fuel duty dries up because of the switch to electric cars.

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Q24) How have motoring costs changed over a 10 year rolling period?

A24) The data chart that can be viewed here plots the percentage change in the price of various aspects of motoring over a rolling ten year period. The RPI cost of living index is also plotted over the same period.

The chart shows that over time, operational costs have generally risen significantly above the rate of inflation. However, the cost of buying a vehicle has not increased as much as inflation.

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Q25) How does the cost of motoring compare to the cost of rail and bus fares over a 10 year rolling period?

A25) The data chart that can be viewed here uses data from the Office of National Statistics to plot, over a rolling ten year period, the percentage change in the cost of motoring and the cost of rail and bus fares. Also plotted are the cost of living (RPI) and average wages.

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Q26) Are drivers out of pocket when using their own cars for work purposes?

A26) Yes. People who drive their own cars for work purposes are being short-changed because the tax-free amount they can receive in recompense has not changed for more than a decade.

Currently, the Treasury allows workers to get a tax-free amount of up to 45p per mile from their employer on the first 10,000 miles per year which they drive in their own car or van. However, the so-called approved mileage allowance payment has not changed since 2011 despite big increases in the cost of motoring since then. (According to the Office for National Statistics (ONS) the cost of motoring in April 2023 was 41 per cent higher than in April 2011.)

Calculations by the RAC Foundation suggest that people who drive their own cars for work should now be entitled to about 63p per mile tax free. This would mean that someone covering 5,000 miles per annum for work in their own car could receive up to £3,150 before facing a tax liability. However, if a firm uses the current tax-free maximum of 45p as the rate of reimbursement, an employee will only get a total of £2,250 meaning they are losing out by £900 annually.

Further details can be viewed here.

Both UNISON and Jim McMahon, MP for Oldham West, Chadderton and Royton, are actively campaigning for an update to the HMRC Approved Mileage Allowance Payments (AMAP).

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Q27) What proportion of household spending is spent on transport?

A27) UK households spent an average of £623.30 per week in the year to March 2024. This was a nominal increase of £55.60 (10 per cent) more than the previous year. After adjusting for inflation this was a real-terms increase of £15.40 (3 per cent).

The average UK household spent the highest proportion of their total expenditure per week on housing, fuel and power (£113.30). Transport was the second biggest proportional expense at 14 per cent (£88.20), with spending up by £9.20 (12 per cent) in the year to March 2024.

Different households have different transport requirements, with some relying on public transport and others more on cars. Not all households buy a vehicle in any given year, but it is a major expense for those that do. The transport expenditure figures are presented averaged across all households, whether they spent on a particular item or not.

On average, £33.50 of household expenditure per week was spent on the operation of personal transport. This included £19.80 per week on the purchase of petrol, diesel and other motor oils and £8.20 per week on repairs and servicing. Households also spent £2.90 per week on other motoring costs eg parking fees, motoring organisation subscriptions and £2.70 per week on spares and accessories.

Households also spent on average £31.20 per week on the purchase of vehicles. This included £23.00 per week spent on buying second hand cars and vans and £7.30 per week spent on buying new cars and vans.

On average £23.40 per week was spent by households on other transport services, such as car leasing, rail fares and air fares. Spending on international air fares was highest at £10.00 per week followed by £6.10 spent per week on car leasing.

Source: Office for National Statistics: Family spending in the UK: April 2023 to March 2024

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Q28) Do local authorities in England make a surplus on their parking activities?

A28) Councils in England made a combined surplus (profit) of almost £1.1 billion from their day to day, on- and off-street parking activities in 2024-25, RAC Foundation analysis concludes. This is 7.4 per cent higher than in 2023-24.

The Foundation’s study is based on data from the 295 local authorities in England (out of a total of 317) that had reported data to the Ministry of Housing, Communities and Local Government (MHCLG) at the time of writing. National parks reporting parking data are excluded from the main analysis.

The figures are calculated by adding up income from parking charges and penalty notices, then deducting running costs. Parking income is derived from three main sources: meter income (including ticket machines and apps), residents’ and business permits, and penalties. Other sources are towing and storage charges although relatively few councils operate pounds now. Between them, the 295 councils had a total income in 2024-25 of £2,163 million, 7.8 per cent higher than in 2023-24. Overall expenditure on parking rose to £1,070 million, up 8.2 per cent from 2023-24 creating a profit of £1,094 million.

Although not all councils made a large surplus, very few lost money on their parking activities. Just 35 of the councils in England who returned parking figures to central Government reported a loss on their parking activities.

Full details can be viewed here.

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Q29) Which English local authority has the largest surplus from parking activities?

A29) The authority with the largest surplus in 2024-25 was Westminster with a profit of £90.6 million.

As in previous years, the largest profits were made by London councils with 9 out of the top 10 surpluses being made by London councils. More than half of the English surplus (55.5 per cent) was generated in London. The total surpluses for London amounted to £602.9 million between 30 authorities, of which the top three–Westminster, Kensington & Chelsea and Lambeth – accounted for 29.8 per cent. No London councils made a loss last year.

Outside of London, Brighton had the highest profit of £29.9 million and ranked 6th nationally for the highest surplus.

Full details can be viewed here.

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Q30) Can local authorities use their powers to charge local residents for parking in order to raise surplus revenue for other transport purposes?

A30) No. In a ruling at the High Court in London, Mrs Justice Lang said the 1984 Road Traffic Regulation Act “is not a fiscal measure and does not authorise the authority to use its powers to charge local residents for parking in order to raise surplus revenue for other transport purposes”.

On-street parking fees and penalty charges can only be set with the intention of “relieving or preventing congestion of traffic” and covering the cost of administering the schemes. Strict rules state that any surplus, with only minor exceptions, must be spent on contributing to the cost of off-street parking, public transport, road improvements and environmental improvements.“ But councils should not set out to raise money for these or any other purpose.

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Q31) What proportion of local authorities' parking income in England comes from on-street and off-street parking activities?

A31) Local authorities in England received total income of £2,163 million from their on- and off-street parking operations in 2024-25.

About 64 per cent of this income came from on-street activities (fees, permits and penalties) and about 36 per cent from off-street activities.

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