Drivers warned Rachel Reeves set to hammer them with tax blow

has been tipped to stick to plans to increase in March next year when the temporary 5p per litre cut is due to expire. The Chancellor announced she would extend the cut in fuel duty rates for 12 months in her maiden Budget.

Introduced in the Spring Statement in March 2022, the 5p per litre cut for diesel, kerosene, unleaded petrol and light oil is due to end on March 22, 2026. The measure aims to protect drivers and support businesses by temporarily keeping fuel duty rates at levels set in March 2022.

Fuel duty is payable on petrol, diesel and other liquid fuels used in vehicles, machinery and heating. It is also paid on gases used as fuel for road vehicles, but excludes gas, electricity and solid fuels such as coal.

But the cut has seen revenues from fuel duty drop. Annual fuel duty receipts fell slightly in the financial year 2024-25, driven by a move away from diesel towards electric and hybrid vehicles, according to the Government.

Fuel duty receipts for the financial year 2024-25 totalled £24.7billion, a drop of £200million compared to 2023-24. This compares to a rise in total tax take of 3.4% on the year before in 2024-25 to £857bn.

Experts have suggested that as the adoption of electric vehicle rises the Government faces a funding challenge resulting from diminishing fuel duty revenues.

Sheena McGuinness, co-head of Energy and Natural Resources at accounting and auditing firm RSM UK, said while the fuel duty cut has helped households with the cost-of-living, it has not encouraged drivers to make the switch to low and no-emission vehicles.

A spokeperson for HMRC said: "As announced at Autumn Budget 2024, this measure extends the temporary cut in the rates of fuel duty first introduced at Spring Statement in March 2022 for a further 12 months.

"This five pence per litre cut will end on March 22, 2026. In addition, the planned increase in line with inflation for 2025 to 2026 will not take place.

"Taken together, this will maintain fuel duty rates at current levels for another year and represents a reduction of around seven ppl (pence per litre) for main petrol and diesel rates in comparison to previous plans."

Ms McGuinness told it was expected that fuel duty would increase by March next year to motivate consumers to shift to electric vehicles and support the Government's ambitious targets to reduce the number of petrol and diesel vehicles by 2030.

She urged the Government to provide industry and consumers with a long-term strategy and "some" certainty on the future cost of motoring which she said would help support the transition to electric vehicles.

All newly registered cars and vans have to be zero emission by 2030 under the Government's Zero Emission Vehicle mandate.

In April, it emerged that sales of electric vehicles (EVs) in the UK are higher than in any other European country, but experts have said demand could be even stronger.

Figures from the Society of Motor Manufacturers and Traders show uptake of pure battery electric new cars reached 382,000 units last year.

That was just above Germany's total of 381,000 after a 27% decline from 2023, partly attributed to a reduction in purchase incentives. EVs held a 19.6% share of the UK's new car market last year, up from 16.5% in 2023.

Pro-EV groups have said the lack of purchase incentives, perception of public charging infrastructure and the taxation system have been putting some people off making the switch to electric motoring.

Ginny Buckley, founder of EV-buying advice website Electrifying.com, said the UK has a "strong market" for EVs, but there are "bumps along the road" towards the 2030 ban on the sale of conventionally fuelled cars.

She said the higher upfront cost of new EVs compared with petrol or diesel cars is the main limiting factor.

Ms Buckley cited a survey which suggested only 45% of drivers are aware of low-cost electricity tariffs for domestic charging, which means "you can run your EV for pennies per mile".

*Quentin Willson, founder of EV lobby group FairCharge, said the new EV market is "being held back by a lack of consumer disposable income".

He added: "Government has promised to help demand for new EVs. They should cut VAT on public charging and help private buyers."

Successive governments have rejected pleas to reduce the 20% VAT rate on public EV charging so it is equal to VAT on domestic charging, which is 5%.