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Gas Oil Duty Changes



In March 2021, the UK Government announced gas oil duty changes, which mean that the rules on the tax relief of red diesel are changing. The revision to the current taxation means that many sectors that use red diesel will no longer receive tax relief, so what does it all mean to gas oil users?


What is changing with the gas oil duty changes?

As of the 1st April 2022, many sectors will now need to use an alternative to red diesel, as they are now being forced to use a different fuel that is taxed at the standard rate for white diesel.

This change has been brought in to help deal with the problem of using unsustainable fuels. So, as they are making red diesel more expensive it is also going to force sectors to look at other alternatives.

The government has stipulated that it will allow private pleasure craft to continue to use red diesel. However, they will need to then pay their fuel, gas or oil supplier the difference between the rate of red diesel and white diesel.

Therefore, the kinds of sectors that are going to need to look for an alternative are the likes of logistics, manufacturing and construction. What this means is that red diesel can only be supplied to exempt sectors such as agriculture, fishing, amateur sports clubs and non-commercial power generation to name a few.


Changing to white diesel- what does that mean?

Red diesel is currently used by a number of industries in machinery and equipment, and it makes up for around 15% of the diesel that is used in the UK.

However, users currently only have to pay 11.14p per litre as a duty rate in contrast to the 57.95 ppl for white diesel. This means that these sectors are going to miss out on making a saving of 81% when they make the switch.

For those sectors that are going to need to make the switch to white diesel then they are clearly going to miss out on savings. However, there are other considerations to make.

The dye that is added to red diesel is added so that it remains in both pipework and fuel tanks. This could lead to authorities believing that anyone who is now using white diesel might have illegally used red diesel previously.

Those red diesel users won’t have to flush out tanks, which might bring some relief to those who thought that they would have to pay the high cost associated with flushing tanks.


What are the Government guidelines on the gas oil duty changes?

As it currently stands, the government is bringing in these changes from 1st April 2022. They are requiring suppliers of red diesel to flush their systems while the government is also requesting that alternative-diesel sources have to be made more affordable.

Therefore, the likes of Hydrotreated Vegetable Oil have to be lowered in price to help ensure that more businesses and users adopt the newer fuels.

The government has recognised that some sectors still require access to this fuel, but the changes are coming in next year, so now could be the time to consider the alternatives that are available.


More information

Gov UK – Reform of red diesel and other rebated fuels entitlement


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