A new analysis reveals that Chancellor Rachel Reeves' upcoming fuel duty hike will make UK diesel drivers the most taxed in Europe, surpassing even Denmark and Germany. Currently, UK diesel drivers pay an average of 85p per litre in taxes, the second-highest rate in Europe. After the hike takes effect in September, this will increase to 91p per litre, pushing the UK to the top of the list.. For petrol drivers, the UK will jump from the 12th-highest taxed to the 8th-highest,with taxes rising from 79p to 85p per litre.

The £500 million VAT windfall

The analysis also highlights that nearly £500 million in extra VAT has been collected due to high pump prices,partly driven by the Iran war. This windfall has intensified calls for Reeves to abandon the fuel duty hike and use the additional revenue to offset the increased costs for drivers. The pressure on Reeves comes as the UK government faces criticism for the financial burden on drivers amid rising fuel prices.

Comparing Europe's fuel tax landscape

According to the RAC Foundation analysis, the UK's current fuel taxes place it among the highest in Europe, but the upcoming hike will exacerbate the situation. For diesel, the UK will surpass Denmark (88p) and Germany (85p) to become the most taxed. For petrol, the UK will jump ahead of countries like France, Italy , and Spain. This shift underscores the significant impact of Reeves' policy on UK drivers compared to their European counterparts.

Pressure mounts on Reeves

The report has sparked a debate on the fairness of the fuel duty hike, with critics arguing that the additional VAT revenue could be used to mitigate the impact on drivers. Reeves faces a dilemma: proceed with the hike and risk further alienating drivers,or reconsider the policy and use the VAT windfall to provide relief. The decision will have significant implications for the UK's fuel tax landscape and the financial burden on drivers.