Petrol and diesel drivers are set to be slapped with a “stealth tax” hike next year, despite the Prime Minister and Chancellor announcing a delay to fuel duty plans.
Sir Keir Starmer and Rachel Reeves confirmed last week that it would freeze the fuel duty cut amid soaring petrol and diesel costs stemming from the Iran war crisis.
A 5p per litre fuel duty freeze was first introduced by the previous Conservative Government in response to the Russian invasion of Ukraine, which sent shockwaves through the global economy.
Under plans announced in the recent Autumn Budget, Chancellor Rachel Reeves announced that the 5p cut would be phased out gradually by 1p in September, 2p in December and 2p in March 2027.
However, in an intervention to mitigate soaring petrol and diesel costs, Labour announced that it would extend the 5p fuel duty cut for the rest of the year.
Chancellor Rachel Reeves cited the Iran war was forcing fuel prices higher than had been seen in previous years, prompting the Government to act.
However, new rates published by HM Revenue and Customs outline that drivers will see new fuel duty rates launching in the new year.
At present, the rate of fuel duty on unleaded petrol is 52.95p per litre, although this will rise by 3p per litre on January 1, 2027, to 55.95p.
Sir Keir Starmer and Chancellor Rachel Reeves are planning a 3p fuel duty hike next year
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GETTY/PA
Rates will rise even further just months after, rising to 57.95p per litre from March 1, 2027, returning costs to rates last seen prior to March 23, 2022.
The same hikes will be seen for diesel in the same timeframe, with drivers potentially in for a nasty shock in the new year.
At the start of 2027, motorists could instantly see a 3p jump in the per litre cost of petrol and diesel at a time when millions are still struggling with the cost of living crisis.
Once rates are equalised in March next year, Labour could hike the rate of fuel duty in line with inflation in the new financial year, further pushing up costs.
Campaigners delivered a 150,000-strong petition to the Treasury last week
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PA
This would also mark the first fuel duty hike in more than 15 years, with successive governments freezing the rate on petrol and diesel.
The HMRC documents state that the Government will confirm final fuel duty rates in the 2026 Budget later this year.
In response to the so-called “stealth hike”, Shadow Transport Secretary Richard Holden described the move as a “U-turn on a U-turn”.
He told the Daily Mail: “We are clear: Labour should abandon their tax raid on drivers in the middle of an energy crisis.”
Labour could hike the rate of fuel duty in line with inflation next year
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PAThis was echoed by AA President Edmund King, who described the 3p hike in January as an “unwelcome New Year present”.
He called on Labour to ensure any further increases in fuel duty are implemented in a phased approach, as would have been the case with the 5p freeze.
Fresh data from RAC Fuel Watch shows that petrol prices have reached a new peak since the outbreak of war in the Middle East at 159.43p per litre.
While diesel prices are falling, drivers are still facing massive difficulties at the pump, with data showing average costs of 184.96p per litre.