UK Petrol and Diesel Price Breakdown

Where Does Your Money Go?

Every time you fill up your car, the price of a litre of petrol or diesel is made up of raw fuel cost, biofuel content, government taxes, and retailer margins. In fact, over 50% of the price is tax.

This guide breaks down the typical cost of a litre of unleaded petrol and diesel in the UK, showing how much you pay for the fuel itself, biofuels, duty, and VAT.

UK Petrol and Diesel Price Breakdown: Where Does Your Money Go?

Every time you fill up your car, the price of a litre of petrol or diesel is made up of raw fuel cost, biofuel content, government taxes, and retailer margins. In fact, over 50% of the price is tax.

This guide breaks down the typical cost of a litre of unleaded petrol and diesel in the UK, showing how much you pay for the fuel itself, biofuels, duty, and VAT.

Components of a Litre of Fuel

A litre of fuel in the UK is made up of four main elements:

Product cost (wholesale petrol or diesel) – The refined fuel from oil

Biofuel content – Ethanol in petrol (E10) or biodiesel in diesel (B7)

Fuel duty – A fixed tax per litre

VAT (20%) – Applied on the total price including duty

Current Fuel Price Breakdown (Example)

Here’s a breakdown based on typical UK pump prices in 2025:

Unleaded petrol: £1.35 per litre

Diesel: £1.42 per litre

Component	Petrol (E10)	Diesel (B7)
Wholesale fuel (excl. biofuels)	43p	46p
Biofuel cost	5.5p	7p
Transport and margin	11p	12p
Fuel duty	52.95p	52.95p
VAT (20%)	25p	26p
Total	£1.35	£1.42

Fuel Duty in Detail

Fuel duty is a fixed government tax per litre of fuel:

Petrol: 52.95p per litre

Diesel: 52.95p per litre

Duty does not change with the oil price, but it makes up around one-third of the pump price.

VAT on Fuel

Fuel is subject to 20% VAT, calculated on the total cost including fuel duty.

Example for petrol at £1.35/litre:

Base fuel + biofuel + duty = £1.12

VAT = 22p (20% of £1.12)

Total = £1.35

This means over 55% of the pump price is tax.

Biofuels in UK Petrol and Diesel

Under the RTFO (Renewable Transport Fuel Obligation), all UK road fuels include a percentage of renewable biofuel:

E10 Petrol: Up to 10% bioethanol (typically from wheat or sugar beet)

B7 Diesel: Up to 7% biodiesel (from waste oils or animal fats)

Biofuels:

Help reduce lifecycle CO₂ emissions

Add a small cost component to each litre (around 3–5p)

Are blended into standard fuels automatically at UK forecourts

What Drives Pump Prices?

The price of fuel at the pump is influenced by:

Global oil prices – The largest factor in the product cost

Exchange rates – Oil is traded in USD

Biofuel market prices – Fluctuate with crop and commodity prices

Government taxes – Fuel duty and VAT

Retailer margins – Typically 8–15p per litre

How Much of Your Fuel Price is Tax?

Taking the £1.35 petrol example:

Fuel duty: 52.95p

VAT: 22p

Total tax: ~75p per litre (~55% of the price)

This means more than half of what you pay goes to the government, not oil companies or fuel retailers.

Key Takeaways for Motorists

UK petrol and diesel prices are roughly 50-55% tax, 40-45% fuel cost, 5-10% retailer margin.

Biofuels are a small but growing part of the cost, supporting renewable energy targets.

VAT on fuel is charged on the whole price, meaning drivers pay tax on tax.

Global oil prices, biofuel costs, and government taxes are the biggest drivers of pump prices.