Reeves freezes fuel duty at 16-year low over Iran war

Key Points

Chancellor Rachel Reeves has extended the 5p fuel duty cut until 31 December 2026
The extension keeps fuel duty at its lowest level in over 16 years
The average driver will have saved £120 since 2025 by year end
Hauliers receive a 12-month road tax holiday, saving up to £912 per vehicle
Red diesel duty cut by over a third, the lowest rate in more than 20 years

Chancellor Rachel Reeves has extended the 5p fuel duty cut to December, holding fuel taxes at a 16-year low.

The Chancellor announced the extension on Wednesday (20 May), citing rising pump prices driven by the war in Iran. By the end of the year, the average driver will have saved £120 since 2025 under the cut, according to the Treasury.

Hauliers will receive a 12-month road tax holiday, paying £1 at renewal in place of standard vehicle excise duty.

The Treasury said the move will save £600 for a typical heavy lorry and £912 for the largest vehicles on UK roads.

Red diesel users including farmers and rail freight operators will see their fuel duty cut by over a third until the end of the year, taking the rate to its lowest level in more than 20 years. Red diesel prices are currently running around 50% above pre-crisis levels.

Prime Minister Keir Starmer linked the announcement to global cost pressures hitting working households, saying the intervention would support drivers and protect household budgets from international price shocks.

The Treasury described the package as timely and targeted, consistent with its position of avoiding kneejerk fiscal decisions in response to the Iran conflict.

“The war in Iran is pushing up fuel prices here at home but after strong growth at the beginning of the year, I am stepping in to protect people at the pump,” said Reeves.

Push to reopen Strait of Hormuz

Foreign Secretary Yvette Cooper has called for the immediate reopening of the Strait of Hormuz, warning 45 million more people could face acute food insecurity if Iran’s closure of the shipping lane continues into the middle of this year.

Cooper made the intervention on Tuesday (19 May) at the Global Partnerships Conference in London, which the UK is co-hosting with South Africa, British International Investment and the Children’s Investment Fund Foundation.

“The world is sleepwalking into a global food crisis,” said Cooper. “We cannot risk tens of millions of people going hungry because one country has hijacked an international shipping lane.”