Rachel Reeves could end fuel duty freeze at Autumn Budget as electric car uptake causes mayhem

This decline comes at a critical time for the Chancellor, with experts warning that she needs to urgently address the revenue shortfall to prevent further investment uncertainty.

The drop in fuel duty receipts could prompt the Chancellor to announce an end to the fuel duty freeze at the Autumn Budget.

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Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK, said: "While the tax take for the majority of other taxes has increased, fuel duty receipts continue to fall.

"This decline is even more stark when tax revenues on average are increasing steadily, with the 2023-24 tax year seeing an annual uptick of 5.3 per cent."

This concerning trend comes despite the critical importance of increasing renewable electricity generation to achieve net zero goals and enhance energy security.

The temporary 5p per litre fuel duty cut, which has contributed to the declining revenues, is set to expire in March 2026.

A Treasury spokesperson told GB News: "The 5p cut is set to expire in March 2026. The Chancellor makes decisions on tax policy at fiscal events in the context of public finances."

Experts have suggested that increasing fuel duty after the extension period ends could help plug the revenue gap while supporting the Government's Zero Emission Vehicle mandate, which requires all new car sales to be electric by 2030.

The current fuel duty rate is reportedly the lowest in cash terms since March 2009, following an 11-year freeze before the cut was introduced in 2022.

Industry analysts suggested that as electric vehicle adoption increases, the Government faces a significant funding challenge in keeping revenues from driving.

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While the current low fuel duty rate has provided relief to motorists during economic pressure, experts warn this comes at the cost of slowing the transition to greener transport options.

With the Industrial Strategy expected in June, the Government faces mounting pressure to address the fuel duty revenue decline as part of a comprehensive approach to energy policy.

"If the Government is serious about energy transition and the role of the energy sector in driving economic growth, tackling the fall in revenue needs to be addressed as part of a long-term strategy which encourages productivity and reinvestment of profits," McGuinness added.

But she did note that the Government has ruled out introducing road pricing as a means to charge electric, petrol and diesel cars at the same rate.

McGuiness stressed that "industry and consumers alike need a long-term strategy and some certainty on the future cost of motoring to support the transition to electric vehicles".

The Autumn Budget, which is expected to take place later this year, hopes to offer some much-needed clarity from the Treasury about its current car tax position.