Red diesel duty to be cut by one-third, says Treasury

Farmers and other red diesel users have been offered some respite from the relentless hike in operating costs, with news that their fuel duty is to be cut by more than one-third until the end of the year.

A Treasury statement on Wednesday (20 May) said this would take the duty on red diesel to the lowest it’s been in more than 20 years, “helping to keep the cost of doing business down at a difficult time when red diesel prices are around 50% more than their pre-crisis levels”.

The change means the duty on red diesel will be reduced from 10.18p/litre to 6.48p/litre from 15 June until the end of 2026.

The Treasury has also extended the 5p/litre cut on road fuel duty to the end of year and granted road hauliers a year’s grace on road tax. 

See also: NAAC contractor price guide 2026-27

Chancellor Rachel Reeves said: “I’m keeping taxes down for drivers and businesses – putting money in the pockets of millions of workers and cutting costs for farmers and hauliers. 

“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.”

Before the US and Israel launched their assault on Iran in late February, red diesel was trading at about 75p/litre, but it then climbed to around 120p/litre, before settling back to nearer 105p/litre.

Reaction

NFU president Tom Bradshaw said: “Since the outbreak of the war in the Middle East, we have consistently raised the inflationary pressures facing farmers and growers. 

“The government’s decision to scrap the planned rise in fuel duty is good news, and the cut to red diesel duty is a welcome, well-targeted measure.”

However, he said there were further steps government could take, such as reversing electricity standing charge increases and delaying the planned carbon border tax on imports of fertiliser.

National Association of Agricultural Contractors (NAAC) chief executive Jill Hewitt said the cut in duty would help with cashflow at a time when farmers and contractors are really struggling.

“Anything that can help as we head into summer harvest and autumn cultivations has to be welcome,” she said.

The NAAC recently released its contractor price guide, indicating an average 5% increase in charges for 2026.

However, this was based on an assumed red diesel price of 70p/litre and the association warned that farmers may have to pay a fuel surcharge on quoted rates.

“That surcharge could go up or down,” said Ms Hewitt.

“Wouldn’t it be marvellous if that could now be down.”