Last updated: 1 September 2026
Red diesel is taxed differently from standard white diesel in the UK because it benefits from a reduced rate of fuel duty when used for qualifying purposes.
As of 1 September 2026, the fuel duty rate on red diesel — officially classed as marked gas oil — is 6.48 pence per litre.
The main fuel duty rate applying to standard diesel remains 52.95 pence per litre.
The red diesel rate was reduced further on 15 June 2026 as part of temporary government measures introduced in response to higher energy prices. The government also cancelled previously planned fuel-duty increases that had been scheduled for September and December 2026.
This guide explains how red diesel is taxed, the current duty and VAT rates, why red diesel costs less than white diesel, who is entitled to use rebated fuel and what may happen to the rates next.
Important: Fuel-duty and VAT rules can change. Eligibility to use red diesel also depends on the vehicle, machine and purpose for which the fuel is being used. This guide summarises the current position but should not be treated as individual tax or legal advice.
What is the current fuel duty rate on red diesel?
As of 1 September 2026, the fuel duty rate applying to marked gas oil is:
6.48 pence per litre
This rate came into effect on 15 June 2026 and is currently due to remain in place until 31 December 2026.
The equivalent main rate applying to standard diesel is:
52.95 pence per litre
This means the current fuel-duty difference between qualifying red diesel and fully duty-paid diesel is:
46.47 pence per litre
The lower rate does not mean red diesel is tax free. Fuel duty is still included in the fuel, but qualifying red diesel benefits from a substantial rebate compared with standard diesel.
Current UK diesel fuel duty rates
| Fuel | Fuel duty rate at 1 September 2026 |
|---|---|
| Red diesel / marked gas oil | 6.48p per litre |
| Standard white diesel | 52.95p per litre |
| Rebated biodiesel for qualifying use | 6.48p per litre |
| Rebated gas oil bioblend for qualifying use | 6.48p per litre |
The 6.48p rate also applies to qualifying rebated biodiesel and gas oil bioblends during the current temporary reduction.
Did fuel duty increase on 1 September 2026?
No.
A fuel-duty increase had previously been scheduled to take effect on 1 September 2026, but the government subsequently cancelled it.
Earlier plans would have started reversing the temporary 5p-per-litre fuel-duty cut introduced in 2022.
However, following new measures announced in May 2026:
- the 5p main fuel-duty cut was extended until 31 December 2026;
- the planned 1 September 2026 increase was cancelled;
- the planned 1 December 2026 increase was also cancelled; and
- the main diesel rate remains at 52.95p per litre.
Red diesel received an additional temporary reduction, taking its duty rate from 10.18p per litre to 6.48p per litre from 15 June 2026 until 31 December 2026.
For businesses monitoring fuel costs, this means there was no increase in UK diesel fuel duty on 1 September 2026.
Why does red diesel have a lower fuel duty rate?
Red diesel is diesel that is eligible for a rebate of fuel duty because it is intended for specific permitted uses.
Standard diesel used in ordinary road vehicles attracts the full rate of fuel duty.
Certain vehicles, machinery and activities are allowed to use diesel carrying a reduced rate. This fuel is dyed and chemically marked so that HMRC can identify it as rebated fuel.
HMRC commonly refers to eligible vehicles and machines as “excepted machines”.
The reduced tax treatment is therefore linked to how the fuel is used, rather than red diesel being an inherently cheaper or lower-quality fuel.
Is red diesel tax free?
No.
Red diesel is sometimes incorrectly described as tax-free diesel.
It is not.
There are two separate taxes that may apply to a red diesel purchase:
- Fuel Duty
- VAT
Red diesel currently carries 6.48p per litre of fuel duty.
VAT may then be charged on the total value of the supply, including the fuel duty.
The rate of VAT depends on factors including the size and nature of the supply and the purpose for which the fuel is being purchased.
How much fuel duty is included in a red diesel delivery?
At the current 6.48p-per-litre rate, the fuel-duty element works out as follows:
| Delivery | Red diesel duty | White diesel duty | Difference |
|---|---|---|---|
| 500 litres | £32.40 | £264.75 | £232.35 |
| 1,000 litres | £64.80 | £529.50 | £464.70 |
| 5,000 litres | £324.00 | £2,647.50 | £2,323.50 |
| 10,000 litres | £648.00 | £5,295.00 | £4,647.00 |
These figures show only the fuel-duty component.
They do not represent the overall difference in the delivered price of red and white diesel, because wholesale product prices, VAT, transport, location, order volume and wider market conditions also affect the final price.
Why is red diesel cheaper than white diesel?
The biggest structural reason is the difference in fuel duty.
At current rates:
Red diesel duty: 6.48p per litre
White diesel duty: 52.95p per litre
That creates a duty difference of 46.47p per litre before other pricing factors are considered.
However, red diesel prices still move with the wider oil and refined-fuel markets.
Changes in:
- crude oil prices;
- diesel wholesale prices;
- exchange rates;
- refining margins;
- international supply;
- transport costs; and
- local availability
can all affect the actual price paid by the customer.
Red diesel is therefore not sold at a fixed discount to white diesel.
The tax advantage remains significant, but the final delivered price of either fuel is still market-driven.
What VAT is charged on red diesel?
Fuel duty and VAT are separate taxes.
VAT treatment can be more complicated than the fuel-duty rate because it depends on the type, quantity and use of the fuel supplied.
HMRC states that qualifying supplies of fuel oil, gas oil or kerosene can be subject to the reduced VAT rate of 5%.
There is also a de minimis rule covering smaller deliveries. Supplies of no more than 2,300 litres of fuel oil, gas oil or kerosene that meet the relevant requirements can qualify for the reduced rate.
Larger commercial supplies that do not qualify for reduced-rating are generally charged at the standard VAT rate of 20%.
Domestic use and fuel used by charities for qualifying non-business purposes can also receive reduced-rate treatment under the relevant VAT rules.
This means the commonly repeated statement:
“Red diesel has 5% VAT”
is not universally correct.
The appropriate VAT rate depends on the circumstances of the supply.
Does a red diesel delivery over 2,300 litres automatically have 20% VAT?
Not in every circumstance.
The 2,300-litre threshold is important because supplies of no more than that amount can fall within HMRC's de minimis rules.
However, qualifying domestic and charity non-business use may still receive reduced-rate treatment independently of that threshold.
For ordinary commercial supplies, deliveries above the de minimis level will generally be standard-rated unless another qualifying VAT provision applies.
Businesses should therefore avoid assuming that VAT is determined solely by whether an order is above or below 2,300 litres.
Is VAT charged on the fuel duty?
Yes.
For VAT purposes, the taxable value of fuel includes the excise duty.
HMRC specifically states that VAT is due on the total value of oil supplies, including any excise duty included within the price.
In practical terms, fuel duty is included first and VAT is calculated on the taxable value of the overall supply.
Can a business reclaim the VAT on red diesel?
A VAT-registered business can generally reclaim VAT incurred on purchases used for its taxable business activities, subject to the normal VAT rules.
That can include fuel.
The business must normally:
- be VAT registered;
- have a valid VAT invoice;
- use the purchase for the purposes of the business; and
- comply with the normal rules governing recoverable input VAT.
Where a purchase has both business and private use, only the appropriate business element may be recoverable, subject to the relevant rules.
Businesses making exempt supplies or operating under certain VAT schemes may not be able to recover all of the VAT they incur.
This is different from reclaiming fuel duty.
Can you reclaim red diesel fuel duty?
Ordinary red diesel users do not normally buy the fuel at the full white-diesel duty rate and then reclaim the difference.
The rebate is already reflected in the duty treatment of the fuel.
Approved suppliers of controlled oils supply qualifying red diesel at the rebated duty rate.
There are specialist fuel-duty reliefs, licences and drawback arrangements in some circumstances, but these are separate from the ordinary process of buying red diesel for an eligible machine or activity.
For most eligible customers, the important point is simply:
You purchase qualifying red diesel with the lower duty rate already applied.
Who can benefit from the red diesel duty rate?
Not every business can use red diesel simply because its machinery operates off-road.
The rules depend on both:
- the type of vehicle or machine; and
- the purpose for which it is being used.
Qualifying uses can include specified activities within areas such as:
- agriculture;
- horticulture;
- forestry;
- aquatic farming;
- arboriculture;
- rail;
- commercial marine transport;
- golf courses;
- Community Amateur Sports Clubs;
- travelling fairs and circuses; and
- certain non-commercial heat and electricity generation.
Eligibility can be highly specific.
For a detailed explanation of current eligibility, see our Red Diesel Law UK: Who Can Legally Use Red Diesel in 2026? guide.
What happened to red diesel tax rules in April 2022?
The red diesel tax regime changed significantly on 1 April 2022.
Before those reforms, many more industries were able to operate machinery using rebated diesel.
The government restricted entitlement so that only specified vehicles, machinery and qualifying activities remained eligible.
One of the industries most visibly affected was construction.
Construction companies had previously made extensive use of red diesel in off-road plant and machinery, but ordinary commercial construction activity generally ceased to qualify from April 2022.
Other sectors and activities retained entitlement.
The reform did not abolish red diesel and did not make the fuel itself illegal.
Instead, it restricted the circumstances in which businesses could legally benefit from its reduced rate of fuel duty.
Is red diesel cheaper because it is lower quality?
No.
The lower price associated with red diesel is primarily a result of its reduced tax treatment.
Red diesel supplied as Class A2 gas oil is manufactured to a fuel specification suitable for the relevant machinery and applications.
The red colour comes from a marker added to the fuel so that HMRC can identify that it has been supplied under the rebated-fuel regime.
The dye is not what makes the fuel cheaper and does not indicate that it is simply an inferior version of white diesel.
Why is red diesel coloured red?
The distinctive colour is there to identify rebated fuel.
Red diesel contains both a visible dye and chemical markers.
These allow HMRC to test fuel and identify whether rebated diesel has been used in a vehicle or machine.
The marking system is an important part of enforcing the difference between the reduced duty rate and the full duty rate applied to ordinary diesel.
What happens if you use red diesel without being entitled to it?
Using rebated diesel in a vehicle, machine or application that does not qualify can result in HMRC enforcement action.
HMRC has powers to inspect and test fuel and may seize vehicles, machinery, vessels, fuel and associated equipment where red diesel has been used illegally.
It may also seek recovery of unpaid duty and impose financial penalties.
Serious cases can result in criminal prosecution.
Businesses should therefore establish entitlement before purchasing and using red diesel rather than relying on historic industry practice.
For more detail, read our guide to what happens if you get caught using red diesel.
What is the difference between red diesel duty and white diesel duty?
At 1 September 2026:
| Red Diesel | White Diesel | |
|---|---|---|
| Fuel duty | 6.48p/litre | 52.95p/litre |
| Difference | 46.47p/litre | |
| Normal road use | No | Yes |
| Use restricted by HMRC | Yes | No equivalent rebated-use restriction |
| VAT | Depends on supply/use | Normally 20% |
White diesel is fully duty-paid diesel suitable for normal diesel road vehicles.
Red diesel receives a fuel-duty rebate and can only be used where the legal conditions for rebated fuel are satisfied.
Read our full Red Diesel vs White Diesel guide for a detailed comparison.
Does HVO have the same fuel duty as diesel?
Hydrotreated Vegetable Oil, or HVO, is treated as a diesel-quality heavy oil for fuel-duty purposes.
HMRC states that HVO is liable to the same excise duty rates as diesel.
HVO can also be supplied at the reduced duty rate for the same qualifying uses as red diesel, provided all of the relevant requirements are satisfied, including marking requirements and supply through an authorised dealer.
Fully duty-paid HVO is also available for commercial applications that do not qualify for rebated fuel.
As of September 2026, qualifying rebated HVO therefore benefits from the current 6.48p-per-litre rate, while ordinary fully duty-paid HVO follows the applicable main diesel duty treatment.
Will red diesel fuel duty increase in 2027?
Under the current legislative timetable, the temporary 6.48p-per-litre red diesel rate ends on 31 December 2026.
The published default rates currently show marked gas oil moving to:
- 10.76p per litre from 1 January 2027
- 11.14p per litre from 1 March 2027
For standard diesel, the published default rates are:
- 55.95p per litre from 1 January 2027
- 57.95p per litre from 1 March 2027
However, HMRC has explicitly stated that the government will confirm the final rates at Budget 2026.
Businesses should therefore treat these as the current scheduled/default rates rather than assume they are guaranteed to take effect.
Why can fuel duty change?
Fuel-duty rates are determined by government fiscal policy and can be amended during Budgets, Spring Statements and other fiscal events.
Temporary freezes or reductions are sometimes introduced in response to wider economic conditions.
The main diesel rate was reduced by 5p per litre in March 2022 and that reduction has subsequently been extended several times.
In 2026, the government extended the cut again and introduced an additional temporary reduction specifically for rebated gas oil amid elevated energy prices.
This is why older articles giving a single red diesel tax figure can quickly become inaccurate.
Always check that a quoted fuel-duty rate relates to the current date.
Red diesel tax FAQs
How much tax is on red diesel?
As of 1 September 2026, red diesel carries 6.48p per litre of fuel duty.
VAT is also charged at the appropriate rate depending on the supply.
What is the duty difference between red and white diesel?
At current rates, the difference is 46.47p per litre.
Red diesel duty is 6.48p per litre and white diesel duty is 52.95p per litre.
Is red diesel duty still 11.14p?
No.
11.14p per litre was the long-standing rebated rate before temporary fuel-duty reductions.
The current red diesel rate is 6.48p per litre until 31 December 2026 under the present rules.
Is white diesel duty still 57.95p?
No.
The current main diesel rate is 52.95p per litre.
The government has extended the temporary 5p-per-litre reduction until 31 December 2026.
Did red diesel tax increase in September 2026?
No.
The planned September increase was cancelled.
Red diesel remains at 6.48p per litre, while the main diesel rate remains at 52.95p per litre.
Do farmers pay tax on red diesel?
Yes.
Qualifying agricultural users benefit from the rebated fuel-duty rate, but the fuel is not tax free.
Fuel duty and VAT still apply at the appropriate rates.
Can construction companies reclaim red diesel duty?
The issue is not generally one of buying red diesel and reclaiming the duty.
Most ordinary commercial construction activity lost its entitlement to use red diesel in April 2022.
Construction businesses normally need fully duty-paid diesel or another appropriate fully duty-paid fuel unless a particular machine and activity independently satisfies one of the remaining qualifying uses.
Is red diesel VAT always 5%?
No.
The VAT treatment depends on the supply, quantity and use.
Certain qualifying and small gas-oil supplies can attract the reduced 5% rate, while larger ordinary commercial supplies are generally standard-rated at 20%.
Can VAT-registered businesses reclaim red diesel VAT?
Potentially, yes.
VAT-registered businesses can generally recover VAT on purchases used for their taxable business activities, subject to the normal input-tax rules and any restrictions that apply.
Check the current rate before making long-term fuel calculations
The red diesel tax position can change significantly following government fiscal announcements.
As of 1 September 2026, the key figures are:
Red diesel duty: 6.48p per litre
White diesel duty: 52.95p per litre
Current rates scheduled to apply until: 31 December 2026
The government is expected to confirm the position applying from January 2027 as part of Budget 2026.
For businesses purchasing significant volumes of fuel, it is therefore worth checking the current duty position rather than relying on historical rates or older online guidance.
Need a red diesel delivery?
Compass Fuels supplies BS 2869 Class A2 red diesel to eligible customers across the UK.
We can supply bulk red diesel from 500 litres through to 36,000+ litre deliveries, alongside white diesel, HVO and other commercial fuels.
If you are unsure whether your vehicle, machinery or application is permitted to use red diesel, check the latest HMRC guidance before placing an order.
Request a red diesel quote from Compass Fuels today.
Eligibility to use rebated fuel remains the responsibility of the fuel user. Fuel-duty and VAT rates can change and businesses should refer to current HMRC guidance where tax treatment is material to a purchasing decision.
