Red diesel duty is changing

What’s changing?

From 1^st 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 1^st 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.

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.

Preparing for the change

By 1^st 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.

Contact us