The new administration of Prime Minister Andy Burnham has confirmed that the temporary 5p per litre fuel duty cut will remain in place until 31 December 2026, ensuring unleaded petrol continues to sell at around 53p per litre across British forecourts.
The decision, announced by the Treasury last week, honours the policy first introduced by the previous government and then extended by former Chancellor Rachel Reeves in May. It now falls under the remit of new Chancellor John Healey, who replaced Reeves after Burnham took office as Prime Minister.
Fuel Duty Cut Extended Until 2026
The 5p cut was originally implemented by the Conservative government in March 2022 in response to soaring fuel costs. It has been repeatedly extended ever since, most recently by Ms Reeves, who confirmed in May that the cut would continue for the duration of the year. Burnham’s government has now gone a step further, locking the reduction in until the end of 2026.
According to HM Revenue & Customs, the measure extends the temporary 5 pence per litre reduction in fuel duty rates until 31 December 2026. It also provides a further reduction to the rebated rate for gas oil, better known as red diesel, as well as biodiesel and bioblend, cutting these by 3.7 pence per litre from 15 June 2026 to 31 December 2026.
For ordinary motorists, the continuation means the price of unleaded petrol will hold at approximately 53p per litre, a level that has brought some relief to drivers who have faced volatile pump prices over the past year.
War Premium and Financial Pressure
The decision to retain the cut comes against the backdrop of the Iran conflict, which has significantly pushed up global oil prices. Speaking at the time of the May freeze, Steve Gooding, director of motoring research charity the RAC Foundation, highlighted the burden on drivers.
“Although today’s news on fuel duty won’t have the immediate effect of bringing forecourt prices down, at least it shows that ministers have registered the financial pain caused by rampant pump prices for individuals and for business. Since the start of the Iran conflict drivers have already paid a war premium of a staggering £3 billion in inflated fuel prices, half a billion of which has gone to the Exchequer in VAT receipts.”
Gooding’s comments underline the broader economic impact of the conflict, which has seen drivers pay billions more at the pumps. The Treasury has cited the same pressures in justifying the extension, stating that Britain’s motorists and businesses will get help with rising prices through a targeted package designed to keep taxes down and support people amid the war in Iran.
Government and HMRC Statements
The Treasury official statement read: “Britain’s motorists and businesses will get help with rising prices at the pumps with a targeted package to keep taxes down and support people with the impact of war in Iran. The Government has announced the 5p cut on fuel duty will be extended for the rest of the year.”
HMRC added that the legislative default will be for fuel duty rates to return to the levels set at Budget 2025 from 1 January 2027. However, the government will confirm final rates at Budget 2026, meaning there remains scope for either a further extension or a rise depending on economic conditions.
Earlier in the political calendar, Sir Keir Starmer told MPs at Prime Minister’s Questions on 20 May that the 5p per litre fuel duty cut introduced by the Conservative government would be extended for the rest of the year. That commitment has now been honoured and expanded by the Burnham administration.
What Happens Next?
With the cut now guaranteed until the end of 2026, motorists can expect some stability in forecourt prices for the coming months. The exact pump price will still vary by location and retailer, but the continued reduction in duty is likely to keep unleaded near the 53p level.
Beyond that, the future remains uncertain. If fuel duty rates revert to Budget 2025 levels in January 2027, the cost of petrol could rise by at least 5p per litre overnight. The Treasury has said it will confirm final rates at Budget 2026, giving drivers and businesses a clear timeframe to prepare.
For now, the Burnham government has moved to reassure the public that fuel prices will not escalate in the immediate future, despite ongoing global tensions. The extended cut represents a careful balancing act between supporting household budgets and maintaining revenue streams for public finances.
