FAQs about motoring taxation and cost of running a car

A2) This page of our interactive data section contains pump price data submitted by fuel retailers to the Competition and Markets Authority (CMA). The supply of data is currently voluntary (though a compulsory scheme is due to be legislated for) and not all companies are providing information. Where they do provide data it might not be for all of the forecourts they operate. Please note that some retail companies sell fuel under a trading name (brand) that is different to their own.

Back to top

Q3) What are the record high prices for the cost of petrol and diesel?

A3) 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.

Back to top

Q4) How does the wholesale (at the refinery gate) price of petrol and diesel compare with the retail (pump) price?

A4) A chart showing both the wholesale (at the refinery gate) price of petrol and diesel and the retail (pump) price can be viewed here.

Back to top

Q5) What are the elements that make up the price of a litre of petrol or diesel?

A5) 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.

Back to top

Q6) What is the current price of petrol and diesel excluding VAT and Fuel Duty?

A6) Figures supplied by the Department for Energy Security & Net Zero show that in March 2024, the average price of a litre of premium unleaded petrol was 144.66p.

The price per litre, excluding VAT, was 120.55p and the price, excluding both VAT and Fuel Duty, was 67.60p.

The average price of a litre of diesel petrol was 153.72p. The price per litre, excluding VAT, was 128.10p and the price, excluding both VAT and Fuel Duty, was 75.15p.

The percentage of the pump price that is Fuel Duty and VAT can be viewed here.

For further historic prices click here (DES & NZ data).

Back to top

Q7) What is the percentage of the fuel price that has been taxation over the last 10 years?

A7) A chart that can be viewed on the interactive data section of our website plots the percentage of the fuel price that has been taxation over a 10 year rolling period.

Back to top

Q8) What is the current and historical rate of Fuel Duty?

A8) The current Fuel Duty rate is 52.95 pence per litre.

It was announced in Spring Budget 2024 that the temporary 5p cut in Fuel Duty (originally announced in March 2022) will be extended until March 2025 and the planned inflation increase for 2024-25 will not take place.

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

Back to top

Q9) What is the cost of filling up an average car?

A9) A chart tracking the cost back to May 2012 based on a Ford Focus with 55 litre tank can be viewed here.

Back to top

Q10) How many grounds can fans of each of the 20 teams in the current Premier League reach on £20 worth of petrol or diesel?

A10) RAC Foundation analysis of how many grounds fans of each of the 20 teams in the current Premier League can reach on £20 worth of petrol or diesel can be viewed here.

Back to top

Q11) Does the UK have the most expensive petrol prices in Europe?

A11) Contrary to popular myth, the UK does not have the most expensive petrol prices in Europe. Click here to see where we rank.

However, the position is different when it comes to diesel where we are routinely one of the most expensive countries in Europe. Click here to see where we rank.

Source: www.energy.eu

Back to top

Q12) What is the proportion of the pump price that is tax in the United Kingdom and EU countries?

A12) 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.

Back to top

Q13) How is the price of crude oil set?

A13) 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.

Back to top

Q14) What is the current price of a barrel of Brent crude oil?

A14) 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.

Back to top

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

A15) On 11 July 2008, a barrel of Brent crude oil hit an all-time high of 148 US dollars.

Back to top

Q16) Why is diesel more expensive than petrol?

A16) 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.

Back to top

Q17) What was announced in Spring Budget 2024?

A17) In Spring Budget 2024, the Chancellor announced that the government is freezing fuel duty rates for 2024-25. The temporary 5p cut in fuel duty rates (originally announced in March 2022) will be extended until March 2025 and the planned inflation increase for 2024-25 will not take place.

The RAC Foundation’s reaction to the Budget can be viewed here.

Back to top

Q18) How much do motorists pay in direct motoring taxes and other taxes?

A18) The taxes that are most directly linked to motoring are Vehicle Excise Duty (VED) and Fuel Duty. Latest figures show that in 2022/23, VED generated around £7.3 billion (up from 7.1 billion in the previous financial year and the highest amount ever raised) and Fuel Duty about £25.1 billion. This was down from £25.9 billion in the previous financial year and was down about 2.5 billion from the amount raised in 2019/20.

Fuel Duty revenue more than tripled between 1987 and 2010. It then remained around the £27/28 billion level until the 2019/20 financial year. Since then, the amounts raised have been below the 2019/20 total.

In 2022/23, these two direct motoring taxes raised about 4 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 – and in 2018/19 these raised approximately £230 million, almost entirely from the London charge. In Nottingham, a Workplace Parking Levy raised £10 million in 2018/19. Tolls were payable on 19 sections of British roads in 2018/19, of which all, bar one, were river crossings. The number of toll roads has reduced significantly in recent years, so that there are now no longer any in Scotland, Wales or Northern Ireland. The annual receipts from these tolled facilities is about £370 million.

In addition to specific road user taxes, some transport expenditure is liable to VAT. For private households, expenditure on purchasing and running motor vehicles in Great Britain amounted to about £84 billion in 2018/19, including VAT. With households spending £34.3 billion on vehicle purchases, the VAT paid would amount to £5.7 billion. The proceeds of VAT on fuel duty (i.e. an enhancement of a direct motoring tax) paid by all road users amounted to £5.4 billion in 2018/19 having grown by 13 per cent in real terms since 2008/9; this increase was the result of the increase in the VAT from 17.5 per cent to 20 per cent. In addition to purchasing vehicles and fuel, road users also buy other motoring-related goods and services worth £16.5 billion a year, adding £2.7 billion to make up the total of £12 billion VAT derived from motorists buying, running and using their vehicles.

VAT is not paid on insurance premiums, as there is a separate Insurance Premium Tax (IPT). The standard rate of IPT has been progressively increased from 5 per cent in 2010 to 12 per cent from June 2017. Motor insurance premiums generated almost £1.2 billion in 2018/19 – double the amount raised in 2009/10. The sharp increase from 2015/16 was caused mainly by the increases in the rate of IPT, and the levelling off in 2018/19 was a consequence of the stabilisation of the IPT rate in June 2017.

Source: Public Expenditure, Taxes and Subsidies: Land Transport in Great Britain – April 2020

Back to top

Q19) How much is spent on roads?

A19) Latest figures show that in 2021/22, about £11.8 billion was spent on national and local roads in the United Kingdom.

This is 0.7 billion less than was spent in the previous financial year.

Source: DfT Table TSGB1303

Back to top

Q20) Is the amount of revenue raised by Fuel Duty from cars likely to decline in future?

A20) Yes. The Chancellor could face losing almost a third of the revenue he 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, an analysis by the RAC Foundation 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

Back to top

Q21) Are there any plans to overhaul VED to encourage the greater take up of green vehicles?

A21) Possibly. The Government has called for evidence on whether the VED system should be overhauled to encourage the greater take up of green vehicles.

Currently, cars are put into bands depending what their CO2 emissions are, and the higher the emissions level the higher the cost of the first year VED rate. In subsequent years most cars then go on to pay a single standard rate. However, ministers are worried that the system is not doing enough to encourage people to go green.

Full details can be viewed here.

Back to top

Q22) Could there be a change in the way motorists are charged for using the roads?

A22) The projected fall in income from VED and Fuel Duty could lead to a change in which 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 recent report on road pricing has 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.

According to the committee “a road pricing system, based on miles travelled and vehicle type, would enable the Government to maintain the existing link between motoring taxation and road usage.”

The committee says that “the ban on the sale of new petrol and diesel vehicles from 2030 will result in a corresponding decline in two significant sources of Treasury revenue. As sales of electric vehicles increase, Treasury revenue from motoring taxation will decrease, because neither fuel duty nor vehicle excise duty are currently levied on electric vehicles.”

It says that government must start an “honest conversation” on the topic and Ministers must ensure that any new system:-

entirely replaces fuel duty and vehicle excise duty rather than being added;
is revenue neutral with most motorists paying the same or less than they do currently;
considers the impact on vulnerable groups and those in the most rural areas;
does not undermine progress towards targets on increased active travel and public transport modal shift; and
ensures that any data capture is subject to rigorous governance and oversight and protects privacy.

Back to top

Q23) How have motoring costs changed over a 10 year rolling period?

A23) 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.

Back to top

Q24) Are drivers out of pocket when using their own cars for work purposes?

A24) 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.

Back to top

Q25) What proportion of household spending is spent on transport?

A25) Households spent an average of £528.80 per week in the year to March 2022. This was a nominal increase of £47.30 (10 per cent) since FYE 2021 but still remains £59.10 (10 per cent) below FYE 2020 and the start of the coronavirus (COVID-19) pandemic. The greatest annual increases were across restaurants and hotels, transport, and recreation and culture which were consistent with the easing of coronavirus restrictions. However, expenditure in these categories for FYE 2022 remained below FYE 2020.

The average UK household spent the highest proportion of their total expenditure on housing, fuel and power (£87.70) and transport (£74.40).

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, £30.70 of household expenditure per week was spent on the operation of personal transport. This included £18.90 per week on the purchase of petrol, diesel and other motor oils and £7.10 per week on repairs and servicing. Households also spent £2.00 per week on other motoring costs eg parking fees, motoring organisation subscriptions and £2.80 per week on spares and accessories.

Households also spent on average £30.90 per week on the purchase of vehicles. This included £20.20 per week spent on buying second hand cars and vans and £9.80 per week spent on buying new cars and vans.

On average £12.80 per week was spent by households on other transport services, such as car leasing, rail fares and air fares. Spending on car leasing (£6.20 per week) was the highest.

Source: Office for National Statistics: Family spending in the UK: April 2021 to March 2022

Back to top

Q26) How does the cost of motoring compare to the cost of rail and bus fares over a 10 year rolling period?

A26) The data chart that can be viewed here plots over a rolling ten year period the percentage change in the cost of motoring and the cost of rail and bus fares. The RPI cost of living index is also plotted over the same period.

While motoring costs seem to have fallen in real terms, this disguises the fact that the (often discretionary) cost of buying a new or second hand vehicle has been falling whilst (non-discretionary) operating costs such as fuel and insurance have risen significantly quicker than inflation.

Back to top

Q27) Do local authorities in England make a surplus on their parking activities?

A27) Information published in the Daily Mail shows that in 2022/23, English councils generated a combined “profit” of £962 million from their day to day, on and off street parking operations.

This was about 12 per cent higher than than the £858 million “profit” made in the previous financial year.

The figures are calculated by adding up income from parking charges and penalty notices, then deducting running costs. The data comes from the statutory annual financial returns made by councils to the Department for Levelling Up, Housing and Communities.

Although not all councils made a large surplus, very few lost money on their parking activities. Just 44 of the councils in England who returned parking figures to central Government reported a loss on their parking activities.

Back to top

Q28) Which English local authority has the largest surplus from parking activities?

A28) As in previous years, the largest profits were made by London councils and the authority with the largest surplus in 2022-23 was Westminster with a “profit” of £71.6 million.

Outside of London, Brighton had the highest “profit” of £30.1 million.

Back to top

Q29) Can local authorities use their powers to charge local residents for parking in order to raise surplus revenue for other transport purposes?

A29) 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.

Back to top

Q30) What proportion of local authorities' parking income in England comes from on-street and off street parking activities?

A30) About 58 per cent of local authorities’ parking income in England comes from on-street activities (fees, permits and penalties) and about 42 per cent from off-street activities.

About 55 per cent of councils’ on-street parking income comes from parking fees and permits and about 45 per cent from penalties.

Source: RAC Foundation

Back to top