The Government has announced a fresh package of support measures aimed at shielding motorists, farmers and haulage operators from rising fuel costs driven by the conflict in Iran. The package includes an extension of the long-running 5p fuel duty cut, a 12-month road tax holiday for hauliers worth up to £912 per vehicle, and a sharp reduction in red diesel duty to its lowest rate in more than 20 years.
Prime Minister Keir Starmer said the measures were designed to protect households and businesses from the impact of global instability on fuel prices.
He said: “I know many are feeling the pressure of energy and fuel costs and are worried about how the conflict in Iran will affect their finances. Because when global events drive up prices, it’s working people who feel it first.
“That’s why this government is stepping in to keep fuel costs down for millions of drivers and putting money back in the pockets of working people.”
The Treasury confirmed that the existing 5p per litre fuel duty cut will now remain in place until the end of the year, delaying plans for a phased increase that had been due to begin later in 2026. The temporary reduction was first introduced in March 2022 following the surge in oil prices after Russia’s invasion of Ukraine and has since been repeatedly extended by successive governments.
According to the Government, the move will save the average driver around £120 by the end of the year, while helping to prevent further increases in petrol and diesel prices at the pumps. Recent spikes in wholesale oil prices linked to tensions in the Middle East have reignited concerns over inflation and household costs.
Chancellor of the Exchequer Rachel Reeves said the intervention formed part of the Government’s broader economic strategy.
She said: “I’m keeping taxes down for drivers and businesses – putting money in the pockets of millions of workers and cutting costs for farmers and hauliers.
“The war in Iran is pushing up fuel prices here at home but after strong growth at the beginning of the year, I am stepping in to protect people at the pump
“By protecting households and businesses we are building a stronger and more secure economy for Britain. That is the right economic plan.”
Alongside the fuel duty extension, haulage firms will receive a one-off 12-month HGV Vehicle Excise Duty holiday. The Treasury said the measure could save operators as much as £912 per vehicle, offering temporary relief to a sector facing rising operational costs and ongoing supply chain pressures.
The Government is also cutting red diesel duty from 10.18p to 6.48p per litre until the end of the year. The reduction, which mainly benefits farmers, rail freight and other off-road fuel users, marks the lowest rate seen in more than two decades.
Richard Smith, Managing Director of the Road Haulage Association, welcomed the announcement but warned that the measures did not go far enough to support struggling operators.
He said: “We are encouraged that the Government is listening to industry concerns, and addressing cost pressures through measures they’ve announced today. But they should go much further.
“We acknowledge the extension of the fuel duty freeze from September to December, and a temporary cut in red diesel which will reduce some costs for operators in the agricultural sector. It’s good to see that the Chancellor is listening after we and other industry groups have long campaigned against fuel duty increases.
“A one-off 12-month HGV VED ‘holiday’ will offer some relief, but overall the Government’s action will have limited impact with many haulage, coach and van operators already on the brink.”
Industry experts also said businesses should continue improving visibility over fleet spending despite the tax support measures.
Paul Holland, Managing Director for UK/ANZ Vehicle Payments at Corpay, including UK brand Allstar, said: “Fuel price volatility has plagued fleets for so long it risks being accepted as the norm, but it shouldn’t be. The Chancellor’s reported plans to scrap the planned 5p fuel duty increase is welcome news and will offer some much-needed breathing space for businesses already under pressure.”
He added: “That said, the freeze doesn’t solve the underlying challenge that fuel remains one of the biggest operational costs for fleets. Our recent research of 300 UK SMB owners and directors who manage fleets of 4 to 20 vehicles shows that just 45% of businesses have meaningful visibility over what their fleet is actually spending, leaving the majority exposed when prices move.”
“Businesses that will navigate these turbulent times most effectively are those using data to take control: tracking driver spending patterns, setting tailored spend limits, and acting on detailed insights. The tools exist – the priority now is putting them to work.”
The latest intervention comes despite warnings from some economists and international organisations that prolonged fuel duty freezes could reduce Treasury revenues and undermine long-term environmental targets. However, ministers argue that immediate cost-of-living pressures and economic uncertainty justify temporary support for drivers and businesses.
