How much tax do you pay on fuel? A full breakdown
17 March 2026
When you fill up your car, a large chunk of the price goes to the government before the fuel company sees a penny. Understanding this breakdown helps explain why UK fuel prices are among the highest in Europe.
The three components of the pump price
Every litre of fuel you buy is made up of three parts:
- Fuel duty — currently 52.95p per litre (with the 5p temporary cut). This is a flat rate charged on every litre regardless of the underlying price.
- VAT — 20%, applied to the total price including fuel duty. This means you pay tax on tax.
- Product cost + retailer margin — the actual cost of the fuel plus the retailer's profit, typically 3-7p per litre.
A worked example
If unleaded costs 132p per litre at the pump:
- Fuel duty: 52.95p
- VAT (20% of 132p): 22.0p
- Product cost + margin: 57.05p
That means roughly 75p of every 132p goes to the government — about 57%. The fuel itself and the retailer's margin account for the remaining 43%.
Why this matters for price comparisons
Since fuel duty is a flat rate, the percentage of tax in your fuel price changes as wholesale costs fluctuate. When oil prices are low, tax makes up a larger share. When oil prices spike, the tax share drops — but the absolute amount stays the same.
How the UK compares
The UK has some of the highest fuel taxes in Europe. Countries like the US pay far less in fuel tax, which is why their petrol prices are roughly a third of ours. Within Europe, only a handful of countries — like the Netherlands and Denmark — have higher rates.
While you can't avoid fuel duty, you can make sure you're not paying more than you need to by shopping around. The price difference between stations is entirely in the retailer's margin, and PumpSaver helps you find the ones charging less.