Forecourt operators will breathe a sigh of relief at today’s Budget announcement that fuel duty will be frozen, and its existing 5p cut will be maintained. But at the same time many fear that other initiatives revealed by the Chancellor will increase their business costs.
Many had predicted that with petrol prices having fallen in recent months that the Chancellor Rachel Reeves would take the opportunity to tax people at the pump. But she said despite losing the Treasury £3bn it was the right decision to avoid an increase in fuel duty rates for 2025-26 to protect working people while the cost of living is so high.
The 5p reduction, which was initially introduced by the Conservatives back in March 2022, with the initial end date expected in March 2024, was reinforced in this year’s spring budget, to help ease fuel costs for drivers. It has now been extended until March 22 2026.
RAC head of policy Simon Williams says that the motoring organisation is relieved after all the speculation that the 5p cut would be scrapped at the same time as pushing duty up beyond the long-term rate of 57.95p.
“It’s good to see the government firmly recognising the importance of the car to millions of households up and down the country,” he says. ”Eight-in-10 drivers tell us they are dependent on their vehicles for the journeys they need to make, while 70% of commuters who live in rural areas have no other feasible alternatives to get to work beyond taking the car.
“It’s also worth remembering that even as of today 56% of the total price of a litre of petrol is already tax in the form of fuel duty, and the VAT that is charged on top.”
While welcoming the news, many forecourt operators will be anxious about other announcements which will increase costs for their business, as part of the government’s efforts to raise £40bn from initiatives in the autumn Budget.
As revealed yesterday, from April businesses will be hit with an increased £12.21 an hour wage bill for employees aged 21 and above.
And the Chancellor has raised employer National Insurance contributions by 1.2% to 15% from April 2025, in what Reeves called “a difficult choice”. However, the threshold at which businesses start paying will be lowered from £9,100 to £5,000.
Off-setting this in part, Reeves announced that smaller businesses were being helped by an increase in Employment Allowance from £5,000 to £10,500. This, she says, will mean 865,000 employers won’t pay any National Insurance at all next year, and over one million will pay the same or less as they did before.
Also the government has committed to a 40% retention of business rates relief for the UK’s retail and hospitality sectors for 2025/26. Currently the discount is 75% until next April. Reeves also announced a freeze to the small business tax multiplier next year.
And significantly, she says that Labour wanted to address the sharp rise in shoplifting, “scrapping the effective immunity for low value shoplifting”. She said that having listened to organisations such as the BRC and union Usdaw, this Budget is providing additional funding to crack down on organised gangs which target retailers.
Meanwhile, in support of its ambitions to increase take-up of electric vehicles (EVs), Reeves says that the government would be maintaining existing incentives for EVs in company car tax. It will also increase the differential between fully electric and other vehicles in the first year rate of Vehicle Excise Duty, beginning in April 2025. And it is extending the 100% first year capital allowances for zero-emission cars and electric chargepoints.
At the same time it is investing over £200 million in 2025‑26 to accelerate EV chargepoint rollout, including funding to support local authorities to install on‑street chargepoints across England. And it is providing £120 million in 2025‑26 to support the purchase of new electric vans via the plug‑in vehicle grant and to support the manufacture of wheelchair accessible EVs.
Also in its bid to back green energy, Reeves announced that the government was funding 11 new “commercial-scale” green hydrogen projects across England, Scotland and Wales.
Other Budget announcements included:
- The government will renew the tobacco duty escalator. Also duty on hand-rolled tobacco will be increased by 10% in the coming year, there will be a flat-rate duty on vaping liquid from October 2026 at £2.20 per 10ml, and there will be a one-off increase in tobacco duty on October 1 2026 to maintain the incentive for smokers to quit the habit.
- Most alcohol’s duty will go up with the Retail Price Index, except for drinks on draft.
- The soft drinks industry levy will increase by the Consumer Price Index every year to keep up with inflation.
- And finally, capital gains taxes have increased, with the 10% rate rising to 18%, and the higher rate from 20% to 24%.
Like many in the industry forecourt operator Guy White says that he is digesting the details, but adds: “I’m very pleased there is no increase on fuel duty.”
Oliver Blake, managing director of Oasis Garage says: “It looks to me like we really have got the short end of the stick,” as he points to the “massive tax increases” on employers. “When Chancellor Rachel Reeves says ’this is not the sort of Budget we would want to repeat’, it speaks volumes,” he adds.
The PRA which has been lobbying for a freeze in fuel duty, says while it is happy on that count, the rise in business rates and National Insurance employer contributions will put further pressure petrol station owners.
”The industry is already facing skyrocketing fixed costs, and further increasing what is already a record business rates burden will only contribute further to this,” says its executive director Gordon Balmer. ”We urge the government to find a sustainable, long-term solution that supports growth and keeps prices manageable for consumers.”
Balmer adds: ”The increase in National Insurance contributions for employers will only add to the financial strain on small businesses, which are already struggling with rising costs. Petrol retailers, like many businesses, operate on extremely tight margins, and any additional tax burden risks further inflationary pressures. We urge the government to carefully consider the broader economic impact of such a move.”
ACS chief executive James Lowman says that the impact on businesses will largely be dependent on their sites’ rateable value and number of employees: But he adds: “The cold hard facts are that the measures announced in the past 24 hours have added two-thirds of a billion pounds to the direct cost base of the UK’s local shops. At a time when trade is tough and operating costs are stubbornly high, this will be challenging for our members to absorb and there will be some casualties on high streets and in villages and estates across the country.”
