VAT windfall from drivers hits £167 million
Drivers have now paid more than £1 billion at the pumps in so-called ‘war premiums’, the RAC Foundation estimates.
Since the conflict in Iran started on 28 February 2026 drivers have paid £1.002 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.
Some 75% (£752 million) of this additional bill has been footed by those with diesel vehicles, reflecting the fact that more diesel than petrol is sold in the UK and the average price of a litre of diesel is now around 33p more than petrol.
Of the £1.002 billion, £167 million has gone to the Exchequer in windfall VAT payments, though some of that amount will be reclaimed by VAT-registered businesses.
Steve Gooding, director of the RAC Foundation, said:
“Whether or not we on the cusp of meaningful peace, drivers continue to pay a huge ‘war premium’ at the pumps, and the Exchequer continues to receive tens of million of pounds from drivers in a VAT windfall it wasn’t expecting.
“Even if the price of oil begins a sustained drop it has got a long way to go before reaching the $70 a barrel mark which is where we were just before the conflict started. That means drivers will continue to feel financial pain on the forecourts probably for weeks to come.”
The proportion of the pump price of petrol which is tax (a combination of fuel duty and VAT) is now 50.9% for petrol. For diesel it is 45.1%.
The price of a barrel of Brent crude oil is currently around $100.
According to government data there were 4.6 million vans and 10.3 million cars powered by diesel on the road in the UK as of the end of quarter 3 2025. There were also 18.9 million petrol cars.
ENDS
Contacts:
Philip Gomm – Head of External Communications – RAC Foundation
[email protected] | 07711 776448
Notes to editors:
The RAC Foundation is a transport policy and research organisation which explores the economic, mobility, safety and environmental issues relating to roads and their users.
It is a registered charity. Charity number: 1002705.
The Foundation publishes independent and authoritative research with which it promotes informed debate and advocates policy in the interest of the responsible motorist. For more information visit www.racfoundation.org