The Autumn Budget is fast approaching, and recent data from HMRC paints a troubling picture for UK businesses that rely on road transport, suggesting a shifting landscape around fuel and fuel tax. The government is under pressure to reverse the long-standing 5p fuel duty cut, as fuel receipts fall due to the shift to EVs, leaving a significant gap in the public purse. Businesses should take notice now, sooner rather than later, or risk being surprised by the impact of any proposed changes coming in the upcoming Autumn Budget.
Our 1-minute summary
HMRC’s latest figures show fuel duty revenues are falling, down £26 million year-on-year, as more fleets shift towards EVs and hybrids.
With revenues dropping, pressure is growing on the government to reverse the 5p per litre duty cut introduced in 2022. If that happens, fuel prices could rise overnight, adding further strain to already tight margins.
Reports suggest that reversing the cut could cost UK drivers collectively more than £7 billion. The Office for Budget Responsibility already assumes a reversal from April 2026, with future fuel duty linked to inflation.
For fleets, this means:
⚠️ Higher pump prices.
📉 Squeezed operating margins.
📊 Budgeting uncertainty.
⚡ Greater / faster pressure to electrify fleets.
In its latest monthly bulletin, HMRC reported that fuel duty receipts for April to September 2025 were £12.2 billion, down £26 million from the same period last year. This decline, whilst modest on the surface, represents a critical inflexion point in UK taxation policy, one that threatens to dramatically increase operating costs for every fleet operator, courier service, and trade business in Britain.
The Treasury faces a stark reality: fuel duty revenues that once represented nearly 7% of total tax receipts in 2019/20 are projected to fall to just 2% by 2025/26. This erosion creates a multi-billion-pound fiscal gap that the Chancellor must address, and all indications suggest that fleet operators will bear the brunt of the solution.
The temporary 5p per litre fuel duty cut introduced in March 2022 during the cost-of-living crisis was always meant to be just that, temporary.
Originally planned to last 12 months, successive governments have extended it year after year, but that political reprieve appears to be ending. As oil prices sit at their lowest level since early 2021, the Chancellor has a timely opportunity to reverse the 5p fuel duty cut and align rates with the Retail Price Index.
For fleet managers and business owners, this isn't abstract economic policy; it's a direct threat to profitability and competitiveness. Understanding what's coming, why it's inevitable, and how to mitigate the impact represents the difference between surviving and thriving in the challenging landscape ahead.
The perfect storm: why fuel duty increases are inevitable
The revenue decline - why the 5p cut is back on the table
The shift towards electric vehicles and hybrids, accelerated by government mandates and environmental pressures, has created an irreversible trend in fuel duty receipts. Total receipts for April 2023 to March 2024 are £0.2 billion lower when compared to the same period a year earlier, primarily driven by a general move away from diesel towards alternative fuelled vehicles, including electric and hybrid electric vehicles.
This decline compounds annually as EV adoption accelerates. The Zero Emission Vehicle mandate pushes manufacturers to sell increasing proportions of electric vehicles, whilst businesses responding to ESG pressures transition away from traditional fuel. Each EV replacing a petrol or diesel vehicle permanently removes a revenue source from Treasury coffers.
Historically, fuel duty revenues have provided a significant proportion of the UK's tax take, making up almost 7% in 2019/20. In contrast, the Office for Budget Responsibility (OBR) forecasts that fuel duty revenues will represent 2% of total tax revenues in 2025/26.
This represents approximately £13 billion in annual revenue erosion by 2030, money that the Treasury must replace through alternative taxation or spending cuts. Given the political and practical difficulties of both alternatives, restoring fuel duty to previous levels represents the path of least resistance.
Some key signals of what may be coming:
The Office for Budget Responsibility (OBR) assumes the 5p cut will be reversed in April 2026, and future fuel duties will rise in line with inflation.
A proposed “pay-per-mile” or unconventional taxation model is being floated to replace lost fuel duty.
The Road Haulage Association warns that a fuel duty hike would be “a hammer blow” to an industry already under margin pressure.
The cost of scrapping the 5p relief is broadly estimated to add around £7 billion in costs to consumers.
The cost of the 5p fuel duty cut
The temporary fuel duty reduction costs the Treasury £3 billion annually, money that must be borrowed or found elsewhere in government finances. The OBR has already factored both these aspects into its forecasts, meaning that without implementation, the Chancellor will need to find an additional £2.7bn from alternative sources.
This £2.7 billion figure represents the combined impact of reversing the 5p cut and applying inflation adjustments that would normally occur under government policy. For a Chancellor facing fiscal pressures across multiple fronts, fuel duty represents one of the few revenue levers readily available for adjustment.
The political calculation has shifted as well. The 5p cut was introduced when fuel prices approached £2 per litre during the acute phase of the cost-of-living crisis. Today, with prices substantially lower, the political cost of reversing the cut has diminished considerably. With oil prices at their lowest level since early 2021, the Chancellor has a timely opportunity to reverse the 5p fuel duty cut, making the policy change more politically palatable than it would have been 12-18 months ago.
The frozen duty effect
Fuel duty has been frozen at 57.95 pence per litre from 2011 until the 2022 cut reduced it to 52.95p. This 15-year freeze represents a substantial real-terms tax reduction as inflation has eroded the duty's purchasing power. Had duty risen with inflation over this period, current rates would be significantly higher, meaning the "reversal" of the 5p cut combined with inflation adjustment actually brings rates only partway back to where they would have been under normal fiscal policy.
This historical context matters because it changes the political narrative from "tax increase" to "ending an unsustainable subsidy." The Treasury can credibly argue that returning to normal taxation policy represents fiscal responsibility rather than punitive taxation of motorists and businesses.
The real-world impact on UK fleets
The immediate cost implications for businesses
For fleet operators, the mathematics are brutally simple.
A 5p per litre increase translates directly to operating cost increases that must be absorbed, passed to customers, or offset through efficiency improvements or better buying, for example, by using a fuel card.
To help illustrate the impact of this change, let's consider a relatively straightforward fleet scenario.
Assuming a vehicle that, on average, consumes 10,000 litres of fuel annually, a 5p increase in fuel duty equates to a £500 increase in running costs through fuel alone;
10-vehicle fleet = £5,000 additional annual expenditure.
50-vehicle fleet = £25,000 additional annual expenditure.
100-vehicle fleet = £50,000 additional annual expenditure.
These figures consider only the direct fuel duty increase. They don't account for the inflation adjustment that's likely to accompany the reversal of the 5p cut, potentially adding another 2-4p per litre depending on RPI calculations.
More concerning still, these costs arrive at a time when fleets face mounting pressures from multiple directions: insurance premium increases, vehicle acquisition costs, driver wage demands, and compliance expenditures from clean air zones and emissions regulations.
The cascade effect through supply chains
The Road Haulage Association (RHA) has warned that reversing the fuel duty cut could increase household living costs by £7.3 billion. This isn't hyperbole; it reflects the reality that fuel costs permeate every aspect of the economy.
Richard Smith, RHA managing director, emphasises the systemic impact: "When businesses face higher fuel costs, the costs don't disappear. They flow through the supply chain. This means households pay more for the weekly shop and energy bills".
For fleet operators, this creates a challenging environment for cost recovery. Whilst your fuel expenses increase by thousands or tens of thousands annually, your customers face similar pressures across their entire supply chain. Passing costs forward becomes difficult when everyone in the chain is seeking to do the same.
Businesses operating on thin margins, courier services, haulage companies, and trade contractors, face particularly acute challenges. Many operate on contracts with fixed pricing or limited adjustment mechanisms, meaning fuel duty increases directly impact profitability with no immediate recovery path.
The competitive disadvantage
Diesel costs more in the UK than anywhere else in Europe, and over half of every pound at the pump already goes to the Government. This creates competitive disadvantages for UK-based operators competing with European businesses or trying to attract work from international clients.
A fuel duty increase exacerbates this competitive gap. UK fleet operators absorb higher operating costs than Continental competitors whilst delivering to the same customers at comparable prices. This squeeze on margins threatens long-term viability, particularly for businesses competing in price-sensitive markets.
Why traditional cost management strategies won't work
The efficiency plateau
Many fleet managers respond to cost pressures by focusing on driver efficiency, route optimisation, and vehicle maintenance. Whilst these measures deliver value, most established fleets have already captured the low-hanging fruit of fleet efficiency initiatives.
Driver training programmes, telematics implementation, and route planning software, these tools are now standard across professional fleets. The operators who haven't yet implemented these measures likely won't do so in response to fuel duty changes, whilst those who have already optimised face diminishing returns from further efficiency efforts.
The reality is that a well-managed fleet might achieve 5-10% fuel savings through efficiency programmes, but these gains take time to realise and require ongoing investment in training, technology, and management attention.
They help, but they don't offset sudden duty increases of 5p+ per litre.
The pricing power problem
The obvious solution, increasing prices to cover higher costs, works only when you possess pricing power with customers. Many fleet operators, particularly in competitive sectors like FMCG, courier services, haulage, and trade contracting, operate in markets where customers can easily switch providers.
Announcing price increases that customers know result from general cost inflation (affecting all providers) is one thing.
Unilateral price increases that exceed competitors' adjustments create customer loss and market share erosion.
Moreover, many fleet operators work on longer-term contracts with limited adjustment mechanisms. A duty increase taking effect in April 2026 might not be recoverable through pricing until contract renewals months or years later.
The EV transition mismatch
The long-term solution to fuel duty exposure is fleet electrification, but this transition timeline doesn't align with immediate duty increases. Electric commercial vehicles remain expensive, with limited range for many applications and inadequate charging infrastructure for operational requirements.
Most fleet operators are planning gradual EV transitions over 5-10 years as technology matures, vehicle options expand, and charging infrastructure improves. A duty increase in April 2026 hits years before these transitions complete, creating an interim period of elevated costs without practical alternatives.
The smart fleet manager's response: strategic fuel management
Understanding the fuel cost iceberg
Fuel duty represents only one component of total fuel costs, but it's a component that smart fleet operators can optimise even without changing vehicles or driving patterns.
The complete fuel cost structure includes:
Wholesale fuel price (approximately 34% of pump price).
Biofuel content (approximately 10%).
Delivery and retailer margin (approximately 6%).
Fuel duty (currently 33%, potentially rising to 36%+).
VAT at 20% (approximately 17%, charged on all other components).
Traditional approaches to fuel cost management focus on the uncontrollable, wholesale prices, duty rates, VAT, whilst ignoring opportunities in the controllable space: where you purchase, how you pay, and how you recover VAT.
The fuel card advantage in a high-duty environment
Fuel cards transform fuel from an unmanaged expense into a strategically optimised cost centre. When every penny per litre matters, and with duty increases, every penny decidedly matters, fuel card benefits become essential rather than optional.
Price optimisation through network access
Fuel cards provide access to negotiated pricing across extensive networks that individual fleet operators cannot access. Right Fuel Card's network of over 98% UK stations includes locations offering discounted pricing that can typically save up to 10p per litre* compared to standard pump prices.
In a rising fuel duty environment, these savings become even more valuable. If duty increases, a fuel card saving per litre offsets the increase, meaning your actual cost increase is lower than first thought.
*Saving figure compared to the national average fuel price over the previous 6 weeks. Prices change weekly. Actual savings are subject to the cost price, the product chosen, and the forecourt chosen.
VAT recovery maximisation
One of fuel cards' most powerful benefits, particularly relevant as duty increases push up total fuel costs, is simplified, accurate VAT recovery. Total VAT receipts for April 2025 to July 2025 are £62.1 billion, which is £2.2 billion higher than the same period last year, demonstrating the substantial sums involved in VAT collection.
For fleets, fuel represents one of the largest VAT-reclaimable expenses.
However, maximising VAT recovery requires meticulous documentation that personal card use or cash purchases simply can't provide. Fuel cards automatically generate HMRC-approved invoices with complete VAT documentation, ensuring you recover every pound you're entitled to claim.
As duty increases push up headline fuel costs, VAT (charged at 20% on the duty-inclusive price) increases proportionally. This means that a 5p duty increase actually creates a larger total cost increase due to VAT's cascading effect. Ensuring complete VAT recovery becomes correspondingly more valuable.
Administrative efficiency when margins tighten
Rising fuel costs focus management attention on controlling all expenses. Time spent chasing receipts, reconciling personal card statements, or manually entering fuel expenses represents wasted effort that could be directed toward revenue generation or strategic planning.
Right Fuel Card provides consolidated weekly digital invoices that eliminate manual receipt processing. A single HMRC-approved invoice replaces dozens of transactions, dramatically simplifying bookkeeping whilst ensuring perfect accuracy.
When margins tighten due to duty increases, this administrative efficiency reclaims time for productive activity.
Cash flow management during transition
Fuel card invoicing cycles provide predictable payment structures that simplify cash flow management. Rather than variable daily fuel purchases throughout the month, you receive consolidated invoices that are paid automatically by Direct Debit.
This predictability becomes particularly valuable during periods of cost increase. Understanding exactly when and how much you'll pay for fuel allows more accurate cash flow forecasting and working capital management; critical capabilities when costs are rising and margins are compressing.
Right Fuel Card: your defence against rising duty
Network coverage where you need it
Right Fuel Card provides access to over 98% of fuel stations across the UK, ensuring comprehensive coverage wherever your vehicles operate. This extensive network means you're never forced to pay premium pricing at independent stations simply because convenient, cost-effective options aren't available.
Our network includes major supermarket forecourts and motorway service stations, providing flexibility to optimise both price and convenience across your entire operating area. When duty increases make every penny per litre significant, having access to the most cost-effective fuelling options at every location becomes essential.
Transparent pricing with no hidden fees
Many fuel card providers offset low headline prices with complex fee structures: transaction charges, monthly minimum spend requirements, hidden card fees, or account maintenance costs.
These hidden charges can eliminate the savings that fuel cards are supposed to provide.
Right Fuel Card's pricing is straightforward and transparent. You know exactly what you're paying, with no surprises when invoices arrive. This transparency allows accurate cost forecasting and ensures that advertised savings translate to actual bottom-line improvements.
HMRC-approved documentation for complete compliance
Our digital invoicing provides HMRC-approved documentation for every fuel purchase, ensuring maximum VAT recovery whilst meeting all tax authority requirements. This is essential for businesses facing the dual challenges of Making Tax Digital compliance and rising fuel costs.
Single consolidated invoices replace dozens of individual receipts, providing the complete paper trail that HMRC demands whilst dramatically simplifying your accounting processes.
When every pound of VAT recovery matters, having bulletproof documentation isn't optional; it's essential.
Beyond fuel: comprehensive fleet protection
Rising costs create pressure that increases risk across fleet operations. Drivers feeling financial stress may take shortcuts, managers focused on cost control may defer maintenance, and businesses under margin pressure may reduce training investment, all of which elevate accident and incident risk.
Right Fuel Card's RightProtect service provides 24/7 legal support, offering immediate professional guidance when driving incidents occur, by the roadside. This protection ensures that cost pressures don't translate into unmanaged legal risks that could dwarf fuel cost increases.
When margins are squeezed due to fuel duty increases, comprehensive risk management becomes more valuable, not less. RightProtect provides peace of mind that incident costs won't compound fuel cost pressures to create existential business threats.
Preparing for April 2026: your action plan
Immediate steps (next 30 days)
1. Calculate your exposure. Determine your fleet's annual fuel consumption and multiply by 5p+ per litre to understand your potential cost increase if duty changes occur. This quantifies the challenge and provides a baseline for evaluating your mitigation approach.
2. Audit current fuel purchasing. Review where and how your vehicles are currently fuelling. Are you capturing available discounts? Are you paying unnecessarily high prices at convenient but expensive locations? Do you have complete VAT documentation for all purchases?
3. Apply for the Right Fuel Card. Don't wait until April 2026 to implement cost-saving strategies. Compare fuel cards and apply online now to begin capturing savings immediately, whilst establishing systems that will cushion you when duty increases take effect.
4. Review pricing and contract structures. Examine customer contracts for cost adjustment mechanisms that might allow fuel cost recovery. Where possible, renegotiate upcoming renewals to include fuel cost escalation clauses that provide automatic adjustment when duty changes occur.
Medium-term strategy (3-6 months)
1. Implement comprehensive fuel management. Use Right Fuel Card's reporting tools to analyse spending patterns, identify opportunities for route optimisation, and establish baselines for monitoring improvement.
2. Enhance driver communication. Ensure drivers understand the cost implications of fuel choice and consumption patterns. When every litre matters more due to duty increases, driver behaviour becomes correspondingly more important to overall cost control.
3. Evaluate vehicle mix and replacement timing. Consider whether accelerating the replacement of inefficient vehicles makes economic sense given rising fuel costs. Sometimes a capital investment in more efficient vehicles pays for itself faster when operating costs increase.
4. Develop customer communication strategies. Prepare explanations and documentation for customers about industry-wide cost increases. Professional, proactive communication about unavoidable cost pressures maintains relationships whilst enabling necessary pricing adjustments.
Long-term positioning (6-12 months)
1. Build fuel cost resilience into your business model. Don't assume fuel costs will stabilise after April 2026. The structural pressures driving duty increases, declining receipts from EV transition, need for alternative revenue will continue for years.
2. Accelerate EV transition planning. Whilst immediate EV conversion isn't feasible for most fleets, developing clear transition roadmaps positions you to capitalise on technology improvements, incentive programmes, and infrastructure expansion. The long-term solution to fuel duty exposure is reducing fuel dependency.
3. Diversify service offerings. Businesses overly dependent on thin-margin, fuel-intensive services face the greatest vulnerability to duty increases. Where possible, diversify into services where fuel represents a smaller proportion of total costs or where customers accept pricing that reflects fuel cost volatility.
The broader context: what comes after duty increases
The road pricing future
Tax experts universally acknowledge that fuel duty cannot sustain government revenues long-term as vehicle electrification progresses.
This means that duty increases in 2026 likely represent only one step in a longer journey toward comprehensive road pricing systems that charge all vehicles, electric or combustion, based on road usage rather than fuel consumption.
For fleet operators, this evolution demands strategic thinking beyond immediate fuel cost challenges. Building systems and capabilities that track vehicle usage, document business mileage, and integrate with digital tax systems positions you for future regulatory requirements whilst addressing current challenges.
The EV taxation question
The government's decision to extend Vehicle Excise Duty (VED) to electric vehicles from April 2025 signals recognition that EV adoption requires new revenue sources. However, VED generates far less revenue than fuel duty currently does, meaning additional EV-specific taxation seems inevitable as adoption accelerates.
Fleet operators planning EV transitions must factor in not just current cost structures, but future taxation that will likely make operating EVs more expensive than many optimistic projections suggest. The TCO advantages of EVs remain compelling in many applications, but they're narrower than pure fuel cost comparisons imply.
The competitive landscape evolution
Not all fleet operators will respond effectively to rising fuel costs. Some will continue with outdated management approaches, absorbing increased costs through margin erosion. Others will respond with aggressive pricing that maintains margins but costs them customers. Still others will exit the market entirely, unable to adapt to the new cost environment.
This creates opportunities for well-managed fleets using sophisticated cost control systems.
As weaker competitors struggle or exit, businesses that have invested in fuel management capabilities can capture market share whilst maintaining healthy margins. Rising costs eliminate marginal operators, creating space for others to thrive.
Taking action: why delay costs money
Every month you delay implementing comprehensive fuel management represents lost savings that you'll never recover.
If Right Fuel Card saves your fleet 8p per litre across 50,000 litres monthly, a six-month delay costs £24,000 in foregone savings, money that could cushion April 2026's duty increase.
More strategically, implementing systems now means you'll have available data, established processes, and organisational capabilities in place when duty increases take effect.
The businesses that weather rising fuel costs successfully will be those that prepare proactively rather than react frantically when duty increases take effect.
Right Fuel Card provides the foundation for this proactive strategy: immediate cost savings, simplified administration, enhanced VAT recovery, and comprehensive documentation, all while building resilience against future cost pressures.
Your fuel cost future: challenged or controlled?
UK fuel duty increases are likely to come. The political calculations have shifted, and the Treasury needs the revenue. The only questions are timing and magnitude, not whether increases will occur.
For fleet operators, this reality demands a strategic response. You can't control government taxation policy, but you can control how effectively you manage the costs that policy creates.
Right Fuel Card provides comprehensive solutions for the challenges ahead: immediate cost savings through network discounts, complete VAT recovery through HMRC-approved invoices, administrative efficiency through consolidated digital invoicing, and comprehensive protection through RightProtect legal support.
The fleets that thrive despite rising fuel costs will be those that recognise fuel management as a strategic capability rather than an administrative task. Every penny per litre saved multiplies across thousands or hundreds of thousands of litres annually. Every hour saved on administration redirects to revenue-generating activity. Every pound of VAT properly recovered flows directly to your bottom line.
Don't wait for April 2026's duty increases to force reactive responses. Act now to implement systems that deliver immediate benefits whilst building resilience for challenges ahead. Your competitors will scramble when costs rise; you'll be ready.
What should fleets do now?
Given everything that we've discussed so far, here are practical steps fleets and business decision-makers should take to stay ahead:
Stress-test your fuel cost models
Run scenarios for your fleet costs assuming a 5p-8p per litre increase. Consider the worst-case and moderate cases.
Lock in fuel pricing where you can
Use fuel cards offering weekly fixed rates to mitigate volatility, look for additional added value, such as fuel card loyalty schemes.
Review fleet mix & electrification plans
If fuel becomes more expensive, electric vehicles (EVs) may become more attractive earlier. But ensure the charging infrastructure is ready to minimise the potential for business disruption.
Route optimisation & fuel efficiency
Invest more in telematics, eco-driving training, and load planning to reduce fuel waste.
Pass on or absorb costs carefully
Decide how much to absorb vs pass to customers, balancing competitiveness and sustainability.
Watch policy & budget signals
Stay alert around the Autumn Budget, and continue to follow our updates, changes may come fast and left-field.
Use integrated fuel + EV solutions
If you’re already using Right Fuel Card + Rightcharge, you benefit from simple, unified billing, which reduces admin impact when prices change.
What does all this mean for Right Fuel Card customers?
Using the Right Fuel Card helps to alleviate the cost pressure from any changes to Fuel Duty. Through a fuel card that offers a fixed, weekly price, you know that you'll always save money versus the standard pump price.
Fixed-price cards help lock part of your fuel cost and reduce exposure to sudden hikes.
Consolidated invoices make VAT reclaim and cost visibility easier, even when fuel pricing shifts.
Mixed-fleet support (fuel + EV) ensures you remain flexible with transitions as duty structures evolve.
Real-time usage data helps you spot anomalies, route inefficiencies and overconsumption early.
In short, the infrastructure you already employ reduces the blow if fuel duty changes.
Final thoughts
The latest HMRC update points to a turning point. The long-held freeze on fuel duty may not last forever, and reversal looks increasingly likely. For fleets and businesses, rising fuel duty is more than a tax change; it affects budgets, strategy, profitability and competitiveness.
If you operate vehicles, now is the time to plan, hedging fuel exposure and accelerating electrification wisely.
Want help running your cost forecasts or understanding which fuel card plan is best for rising duty risk? You can easily compare fuel cards online to ensure you get the right one for your business.
About Right Fuel Card
Right Fuel Card is a leading UK fuel card provider dedicated to helping businesses of all sizes, from sole traders to large fleets, take control of their fuel costs and simplify expense management. With access to over 98% of fuel stations across the UK, competitive pricing, and HMRC-approved digital invoicing, we make fuel management effortless whilst helping you save money. Our comprehensive service includes detailed online reporting, dedicated customer support, and optional RightProtect legal support for complete peace of mind on the road. Whether you're managing a single vehicle or an entire fleet, Right Fuel Card provides the tools and support you need to operate efficiently and compliantly.
Ready to protect your business from rising fuel costs? Compare fuel cards online to find the perfect solution for your business. It takes just minutes to see how much you could save, and our expert team is ready to help you get started today.
This article was written on Monday, 27th October 2025 and published on Tuesday, 28th October 2025. All information contained within is correct at the time of writing. We try our best to continue to update our guides, but not all guides are regularly reviewed - for the latest news and insight visit: rightfuelcard.co.uk/news-insights
