Rachel Reeves is preparing for a more abrupt increase in fuel duty at the start of the New Year, following a delay in earlier plans for a gradual rise, according to recent figures.
Data released by HMRC indicates that the Chancellor intends to impose a 3p per litre hike in fuel duty on January 1, hitting drivers with a sudden increase.
Originally, the plan was to introduce a 5p per litre increase in stages, with 3p of that rise to be implemented over three months. These plans were postponed last week, but were set to begin with a 1p increase on September 1, followed by a 2p rise on December 1, and another 2p on March 1 of the following year.
However, the updated HMRC figures suggest that starting January 1, fuel duty on petrol and diesel will jump from 52.95p to 55.95p per litre, with an additional 2p increase scheduled for March 1.
This adjustment would elevate fuel duty to 57.95p per litre, marking the highest rate in over four years. This comes after a previous 5p per litre cut by the Tories in 2022, a move made in response to soaring fuel prices caused by Russia’s invasion of Ukraine.
It would bring fuel duty back up to 57.95p a litre, the highest for more than four years after the Tories cut it by 5p a litre in 2022 amid soaring pump prices sparked by Russia’s invasion of Ukraine.
During last week’s announcement, Ms Reeves did not reveal whether she would maintain phasing in the hike when it goes ahead, leaving several questions unanswered about how it would be brought in.
Chancellor Rachel Reeves was heckled during a photoshoot to promote the fuel duty announcement at a forecourt in Leeds last week, branded ‘a sleight of hand’ today because of the latest disclosure
A man driving a white van heckled the Chancellor at the forecourt in Leeds where she was promoting her fuel duty announcement last week, branded ‘a con’ today because of the latest disclosure
Tory Shadow transport secretary Richard Holden said the latest revelations were a ‘U-turn on a U-turn’ because Labour ‘won’t control welfare spending and it’s drivers paying the price’
MPs and motoring groups said the disclosure was a major blow for households, just as energy bills soar in the New Year to keep the heating on during winter.
Tory MP Greg Smith said: ‘The Chancellor wants us to think she’s being generous.
‘But the detail always reveals the truth – she’s still tax gouging motorists, just in a sneakier, stealthier way.
‘Our fuel duty in the UK is astronomical compared to others.
‘If she wants to support motorists to get on with their lives she should scrap these hikes altogether, not compound the war on motorists.’
Tory Shadow transport secretary Richard Holden added: ‘This is a U-turn on a U-turn from Labour because they won’t control welfare spending and it’s drivers paying the price.
‘We are clear: Labour should abandon their tax raid on drivers in the middle of an energy crisis.’
John O’Connell, chief executive at the TaxPayers’ Alliance, said: ‘Motorists will see right through this latest fuel duty sleight of hand from Rachel Reeves.
‘Delaying tax hikes by a few months only to hit drivers with a larger increase later is pure smoke and mirrors from a Treasury desperate to squeeze more out of taxpayers.
‘Reeves should scrap these planned fuel duty rises altogether instead of treating drivers as an endless cash machine.’
AA President Edmund King said: ‘The 3p hit on January 1 will be an unwelcome New Year present.
‘As the previous increases were planned to be phased, we believe that similar phasing should be added to this increase if it is to go ahead.’
Howard Cox, founder of the FairFuelUK campaign, said the latest fuel duty disclosure meant the Chancellor’s announcement last week was effectively ‘a con’
Since the Iran war sent pump prices soaring, filling the average 55-litre tank in a family car with petrol has jumped by around £14 and £24 for diesel
Howard Cox, founder of the FairFuelUK campaign, said: ‘Labour’s latest smoke and mirrors con offers motorists misleading short-term relief for a few extra months in 2026, while a huge 3p duty hike, hidden in HMRC’s small print, will now hit drivers hard after Christmas.’
Ms Reeves hailed the decision last week to postpone her fuel duty hike after weeks of mounting pressure amid sky-high pump prices sparked by the Iran war and the Strait of Hormuz being blockaded.
But she clashed with an angry white van driver at a forecourt in Leeds while unveiling the policy, who accused her and Labour of being ‘useless’ and ‘ruining the country’.
Labour had been accused of dragging its feet over fuel taxes after several other countries slashed them amid soaring global oil prices to help out hard-pressed drivers.
Treasury sources say the Chancellor could still scrap January’s hike in this year’s Autumn Budget, with no final decisions being made until then.
Speaking in the Commons last week, Ms Reeves said: ‘The freeze in fuel duty will continue until the end of this year, and we will keep it under review, depending on what happens in the Middle East.’
While average diesel pump prices have dipped to 184.96p a litre after hitting a high of 191.54p following the outbreak of the war, petrol climbed to a new post-war high today of 159.43p a litre.
It means diesel remains 43p a litre more costly than before the war broke out on February 28, while petrol is 27p dearer.
According to analysis by the RAC Foundation, the Iran war has collectively cost drivers an extra £3.1billion at the pumps because of soaring prices sparked by oil supplies being squeezed due to the war.
In turn, Ms Reeves has raked in more than £500million more in VAT as higher pump prices means the 20 per cent levy accounts for a bigger slice going towards Treasury coffers.
The HMRC figures were published in a policy paper on Friday entitled ‘Amended Fuel Duty rates: 2026 to 2027’.
It stated that the levy on unleaded, under the ‘light oils’ category, will rise from 52.95p to 55.95p a litre on January 1 and then to 57.95p on March 1 next year.
It assumed diesel, under ‘heavy oils’, will be subject to the same increase.
The RAC’s head of policy, Simon Williams, said: ‘After the Government’s announcement last week that there will be no increase in fuel duty this year, drivers will feel very let down if it’s merely been delayed to 1 January 2027.
‘We urge the Chancellor to dismiss this suggestion as soon as possible to reassure drivers they won’t be starting the year with a painful 3p-per-litre increase in duty.’
