Reactive (response to change)

Fuel duty in 2026–27: rebate changes now in effect and step-ups to plan for

SI 2026/555 has extended the 5 pence-per-litre fuel duty freeze to 31 December 2026 and added a further rebate of approximately 3.7ppl on gas oil, biodiesel, and bioblend from 15 June 2026. Businesses that purchase or account for rebated fuels — including road hauliers, agricultural operators, construction firms, fuel suppliers, and duty warehousekeepers — should update their duty accounting now and budget for the two scheduled rate step-ups in early 2027.

Change event: Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) (Amendment) Order 2026 Effective 15 June 2026

Related guidance

Topics

Other Taxes Excise Duty Transport

What has changed

The Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) (Amendment) Order 2026 (SI 2026/555), made on 21 May 2026 and in force from 15 June 2026, makes two changes under the Hydrocarbon Oil Duties Act 1979.

First, it extends the temporary 5 pence-per-litre (5ppl) fuel duty freeze — which has been in place since 2022 — from its previous expiry of 31 August 2026 to 31 December 2026. The transition dates associated with that freeze are also deferred to 1 January 2027.

Second, it increases the rebate allowance on duty charged on gas oil, biodiesel, and bioblend by 9.96%, producing a further effective reduction in the net duty rate of approximately 3.7 pence per litre on those fuels. This additional rebate applies from 15 June 2026 until 31 December 2026 and is on top of the existing 5ppl freeze.

Who is affected

The changes affect businesses and charities that purchase or use rebated fuels — commonly known as red diesel or marked gas oil — for qualifying off-road and non-road purposes. The principal audiences are:

  • Agricultural operators — farming, horticulture, and forestry businesses using gas oil in tractors and other off-road machinery.
  • Construction firms — operators of excavators, plant, generators, and other off-road equipment running on gas oil or bioblend.
  • Road haulage and logistics — fleets that use rebated fuels for off-road or ancillary operations, and operators managing fuel supply contracts or bulk tanks.
  • Fuel suppliers and duty warehousekeepers — any business that holds rebated fuel in an excise warehouse or charges duty on gas oil, biodiesel, or bioblend. You must update your duty rate tables and accounting systems to reflect the revised rebate rates for products charged to duty on or after 15 June 2026.
SI number
SI 2026/555 — Excise Duties (Surcharges or Rebates) (Hydrocarbon Oils etc.) (Amendment) Order 2026
In force
15 June 2026
Existing 5ppl freeze extended to
31 December 2026 (previously 31 August 2026)
Further rebate on gas oil, biodiesel and bioblend
Approximately 3.7ppl (9.96% increase to rebate allowance) — 15 June to 31 December 2026
Rate step-up: stage 1
+3ppl on 1 January 2027
Rate step-up: stage 2
+2ppl on 1 March 2027

Action for duty warehousekeepers and fuel suppliers

If you are a fuel supplier or duty warehousekeeper, you must ensure your duty accounting reflects the revised rebate rates for gas oil, biodiesel, and bioblend charged to duty on or after 15 June 2026. The additional 3.7ppl effective reduction applies from that date under SI 2026/555, but your internal systems and rate tables must be updated to account for it correctly.

If you have locked in fuel supply contracts, review your rate assumptions for Q3 and Q4 2026 in light of the lower net duty rate, and ensure those contracts capture the return to higher rates from 1 January 2027.

Planning for the 2027 rate step-ups

Two separate changes to duty rates are scheduled to take effect in early 2027, and fuel-intensive businesses should plan for both.

The 5ppl freeze unwinds in two stages:

  • 1 January 2027: a +3ppl increase takes effect as the first stage of the freeze unwinding.
  • 1 March 2027: a further +2ppl increase takes effect.

The additional 3.7ppl rebate on gas oil, biodiesel, and bioblend ends on 31 December 2026. From 1 January 2027, those fuels will no longer benefit from the 9.96% uplift to the rebate allowance that has applied since 15 June 2026.

Businesses in road haulage, agriculture, and construction should factor both changes into contract pricing, fleet operating cost forecasts, and budgets for the financial year beginning April 2027. If you operate a duty warehouse or manage bulk fuel procurement, review whether any forward contracts or hedging arrangements need to account for these January and March 2027 rate dates.

Do not use rebated fuel for non-qualifying purposes

Using red diesel or other rebated fuel for purposes not permitted under the Hydrocarbon Oil Duties Act 1979 is an offence. HMRC may take enforcement action, including recovering unpaid duty. The rebate changes in SI 2026/555 do not alter the rules on permitted uses of rebated fuel.