Preparing for red diesel duty changes

What's changing?

What's changing?

Most machines and vehicles won’t be able to use rebated fuels.

Find out more
How you can prepare

How you can prepare

Businesses need to take steps now to be ready by 1st April 2022

Discover your options
Frequently Asked Questions

Frequently Asked Questions

Understanding how the red diesel changes affect you

More about changing fuel duty
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More restrictions on rebated fuel usage

What’s changing?

From 1st April 2022, most businesses that currently use rebated (red) diesel and biofuels will no longer be allowed to do so. By that date, they’ll need to switch to white diesel or biofuels, which carry the full rate of duty.

 

What is red diesel?

Otherwise known as gas oil or tractor diesel, red diesel is intended to be used in non-road mobile machinery and is taxed at a lower rate to road diesel. There are strict restrictions on when red diesel can be used, and these limits will increase significantly on 1st April 2022. Most businesses will be impacted.

 

Why are the rules changing?

These duty changes are part of the government’s aim to bring the UK’s greenhouse gas emissions to net zero by 2050 – a target that is set in law. The changes are also intended to support another of the government’s objectives to cut air pollution to save lives.

Red diesel makes up around 15% of all diesel use in the UK and is responsible for producing 14 million tonnes of CO2 a year. Reducing the entitlement to red diesel is a way to incentivise businesses to scale down their diesel usage altogether.

If your business has its own net zero targets, we can help you reach them with a tailored a four-step sustainability plan. With the help of World Kinect Energy Services, we will create a strategy to reduce your carbon footprint, achieve carbon compliance, reduce your energy use, source renewable energy and offset remaining carbon emissions.

 

How will the red diesel changes affect businesses?

If your business is losing its entitlement, you will face significant cost increases. White diesel duty currently attracts a fuel duty rate of 57.95 pence per litre – 46.81 pence per litre higher than the duty rate of red diesel. You should take steps now to mitigate the impacts of the duty increases.

It’s also important that you make arrangements to wind down your use of red diesel before April 2022. From then, it becomes illegal to put rebated fuel into your vehicles, vessels, machines or appliances that are not allowed to use it.

 

Getting ready for the changes takes time. We encourage our customers to speak to us now so we can help you prepare your equipment for the switch and find ways to reduce the impact of additional costs.

 

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Industry impact

Which businesses do the changes affect?

Every business in every sector should look into how their operations will be impacted because the new rules are wide reaching.

The rebated fuels affected by the changes include:

  • Red diesel
  • Hydrotreated vegetable oil (HVO)
  • Biodiesel and bioblend
  • Fuel substitutes

Some businesses will be able to continue using rebated fuel, but for very specific purposes. These businesses include those in:

  • Commercial boating, including fishing and inland water freight industries and passenger ferries
  • Non-commercial power generation, such as hospitals and off-the-grid households
  • Agriculture, forestry, horticulture and fish farming
  • Rail transport
  • Non-commercial heating, such as places of worship and town halls
  • Travelling funfairs and circuses
  • Amateur sports clubs, including golf courses
If your business falls within one of these categories, you should visit the government website to make sure you’re familiar with the specific requirements for using rebated fuel.
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Supporting you at every stage

Preparing for the change

By 1st April 2022, you must not have rebated fuel in your vehicles and machinery if they’re not allowed to use it. That’s why it’s important that you create a plan to run down this fuel to avoid having to sell or dispose of it, which might not be cost-effective for your business.

When the new rules come in, you’ll need to use a fully duty-paid diesel or biofuel. Our fuel experts can help you select the optimum option for both cost-effectiveness and efficiency.

 

Consider your transition to net zero

The demand for organisations to become carbon neutral is increasing, and these new changes will put more pressure on businesses to change the way they operate to reach net zero.

Our sustainability experts can help you progress on your targets. Through choosing the right lubricants for your vehicles and proper fleet care, you can improve your fuel efficiency. Our colleagues at World Kinect Energy Services can give you tailored energy efficiency tips, which can also help you cut costs.

When you switch fuels, it is the ideal time to consider lower-carbon alternatives, such as HVO.
Although subject to the duty changes, alternative fuels can deliver the efficiency benefits of improved performance, better cold weather properties and low sulphur combustion.

 

We’re here to support your business, through the red diesel duty changes and towards a sustainable future. Get in touch with our experts to find out more.

 

FAQs

Frequently Asked Questions

What is red diesel?

Red diesel is another name for gas oil or agricultural diesel. It is typically used in off-road transport, power generation and for some commercial heating or burning appliances. Because red diesel attracts a lower duty rate, there are restrictions on when it can be used. It is dyed red so that the authorities can spot illegal usage, hence the name, red diesel.

How will red diesel duty rise?

Red diesel is a rebated fuel, meaning it is entitled to a rebate of 46.81ppl. Under the new rules, red diesel duty won’t increase. Instead, there will be significantly more restrictions on the purposes for which it can be used. This means that lots of businesses will need to switch to a white diesel or alternative, which attract the full rate of duty. The current duty rate of white diesel is 57.95 pence per litre – 46.81 pence per litre higher than the rebated duty rate of red diesel.

Is red diesel being scrapped?

No, red diesel will still be produced and permitted for select purposes. However, the purposes are being further restricted to force most businesses to choose an alternative. 

More information on who will be able to continue can be found on the government website.

Is the duty on biofuel changing?

Yes, the new duty rules also extend to biofuels. You will only be able to use rebated biofuel for very specific purposes.

When does red diesel duty change?

During the 2020 Budget, the government announced the duty changes that will come into effect on 1 April 2022. By that date, all vehicles and machinery that will be excluded from using red diesel will need to switch to non-rebated fuel.

Why is red diesel duty changing?

The government passed laws in 2019 to commit to reaching net zero emissions by 2050. These new rules are part of a strategy to meet this target. The aim is to incentivise businesses to reduce diesel usage.

What sectors are still eligible to use red diesel from April 2022?

There are a handful of industries that can continue to use red diesel, such as agriculture, amateur sports clubs, commercial boating and more.

However, even within select sectors, there are specific rules on when it can and cannot be used.

All businesses that use red diesel should look into whether they need to switch to white diesel and how to comply with the rules. If in doubt, contact our experts.

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