How Does Fuel Work on Tax and VAT?

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One of the essential commodities in the world is fuel. It can be hard to imagine this modern world without fuel. Most of the time, the image conjured in our heads with this word is the liquid kind. It is what is pumped into cars and other machinery to make them move. However, the definition of it includes sources like wood and even sunlight. 


The one that is always going to be in our minds is liquid fuel. More specifically, diesel, petrol, and other liquefied fuels. There are many different kinds of fuel like them, but they do go in automobiles and other equipment. As they are a part of goods and services, they are also taxed according to British law. However, they do work a little differently compared to other necessities.


Fuel tax is considered as one of the most profitable portions for the government. If you want to look at it closely, there were about 33 million passenger cars last year. Apart from new ecological-friendly options, there are still a large number of vehicles that need fuel to run. Each kind has its taxation, so you may need to be aware of it as a citizen of this country.


Levels for Taxation

Currently, seven types of fuels are being used for vehicles. These are ultra-low sulphur petrol, ultra-low sulphur diesel, biodiesel, bioethanol, liquefied petroleum gas, natural gas, and electricity. Out of all them, the only one that is not taxed is electricity, as this commodity has its own set of rules related to it. Meanwhile, the rest have varying numbers for taxation purposes. 


For example, the first four on that list charge at 57.97 pence per litre. Liquefied petroleum gas requires 31.61 pence per litre, while natural gas is at 24.7. As we have mentioned before, it is only electricity that has none of these taxing rules. However, you still need to pay for that through your provider. After all, our taxes do not just come from the consumption of goods but also from our services. 


You may have noticed that this is quite high compared to other countries. Even in the EU that our country has exited (see Brexit), it is still comparably lower than that of the more prominent countries there like Germany. This is mainly because of a law that tries to discourage people from using their cars. Their line of thought is all about increasing prices to control the number of vehicles roaming the streets.

There seems to be a new movement these days that is trying to change that. With the recent pandemic taking a toll on everyone, the British government appears to agree. However, it will depend on future developments on whether this would push through. Fortunately, many are in favour of this and are raising their support in various media. It might take some time before changes can be done, but it will hopefully improve the lives of people who travel every day. 

Final Thoughts

You can manage your finances with the help of an accounting firm. Annette Ferguson – a Chartered Accountant and Certified Profit First Professional – can assist you in unlocking financial strategies to boost business profitability. Get in touch. Our social media channels and YouTube channel are also available to follow.

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.

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