Red diesel duty has changed

Restrictions on rebated fuel usage

What has changed?

From 1^st April 2022, most businesses that previously used rebated (red) diesel and biofuels are no longer allowed to do so. From this date, white diesel or biofuels, 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 increased significantly on 1st April 2022. Many businesses have been impacted.

Why have the rules changed?

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 accounts for around 15% of all diesel use in the UK and produces 14 million tonnes of CO₂ annually. Reducing the entitlement to red diesel would incentivise businesses to reduce their diesel usage altogether.

If your business has its own net zero targets, we can help you to source renewable energy and offset your 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 52.95 pence per litre – 42.77 pence per litre higher than the duty rate of red diesel.

From 1 April 2022, it became illegal to put rebated fuel into vehicles, vessels, machines, or appliances that are not allowed to use it. You can take steps now to mitigate the impacts of the duty increases.

Which businesses do the changes affect?

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

Some businesses can continue using rebated fuel, but only for very specific purposes. They include:

• Commercial boating, including fishing, 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

The rebated fuels affected by the changes include:

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

If your business falls into one of these categories, you should visit the government website to familiarise yourself with the specific requirements for using rebated fuel.

Adapting to the changes takes time. We encourage our customers to speak to us now so we can help you find ways to reduce the impact of additional costs.

Speak to our experts