What makes up the price of a litre of petrol?
A litre of petrol in the UK is made up of four parts: fuel duty, VAT, the wholesale cost of the fuel, and the retailer's margin. Fuel duty is a fixed 52.95p a litre at the moment. VAT is 20% of the final price. Whatever is left covers the fuel itself, getting it to the forecourt, and the retailer's costs and profit. Diesel is made up the same way.
How much fuel duty is on a litre of petrol?
The main rate of fuel duty on petrol and diesel is 52.95p a litre. It is the same whatever the pump price, so it doesn't rise or fall when prices change.
The rate includes a temporary 5p cut first introduced in March 2022. The government has extended that cut to 31 December 2026. Under the current law, duty is due to rise to 55.95p a litre on 1 January 2027 and to 57.95p a litre on 1 March 2027, which was the rate before the cut. The government has said it will confirm the final rates at Budget 2026, so these dates could change.
How much VAT is on petrol?
Fuel is charged VAT at the standard rate of 20%. VAT is added on top of everything else, including the fuel duty, so you pay VAT on the duty. That means VAT is always one-sixth of the price you see on the pump. At 150.0p a litre, 25.0p is VAT. At 180.0p a litre, 30.0p is VAT.
A worked example
This example uses a pump price of 170.0p a litre to show how the parts fit together. It is not today's price. The UK average for petrol right now is 174.2p.
| Part of the price | Pence per litre | Share |
|---|---|---|
| Fuel duty | 52.95p | 31% |
| VAT (one-sixth of 170.0p) | 28.33p | 17% |
| Wholesale fuel, delivery and retailer margin | 88.72p | 52% |
| Pump price | 170.0p | 100% |
In this example, tax makes up just under half of the price. When pump prices are lower, tax takes a bigger share, because duty stays the same. When prices are higher, its share falls.
What is the wholesale cost of fuel?
This is what the retailer pays for the petrol or diesel before it reaches the forecourt. It depends mostly on the global price of refined fuel, which follows the price of crude oil, the balance of supply and demand for each fuel, and the exchange rate between the pound and the US dollar, as oil is traded in dollars. The cost of blending in renewable fuels and transporting fuel by road tanker to each station also sits in this part of the price.
The Competition and Markets Authority (CMA) has found that most of the movement in pump prices comes from global factors and the price of crude oil. Wholesale costs are also why diesel and petrol prices can move apart. Our guide to why diesel costs more than petrol explains that gap.
How much profit do petrol stations make per litre?
The retailer's margin is the difference between what it pays for the fuel and what it charges, after tax. That margin has to pay for staff, rent, card fees, equipment and energy before any of it is profit.
The CMA tracks margins across the market. In its June 2026 update, it reported that the average road fuel margin had reached 11.3p a litre in April 2026, a level it described as historically high. Margins vary between retailers and between petrol and diesel, and some sites charge much more than others. Motorway services, for example, have charged a large premium for years, which we cover in our guide to motorway services fuel prices.
Why do prices differ between stations if tax is the same?
Duty and the VAT rate are the same at every forecourt. The differences come from what each retailer paid for its fuel, when it bought it, its running costs, and how much margin it chooses to take. A station with rivals nearby usually prices more keenly than one with no competition for miles.
See how prices compare where you live
Because tax is fixed, the price gap between forecourts is almost all down to the retailer. Check fuel prices in your town to see how much the cheapest and dearest stations differ.
Sources
- GOV.UK: Amended fuel duty rates for 2026 to 2027
- GOV.UK: VAT rates
- CMA: road fuel market monitoring update (June 2026)
- Live prices: the UK government's Fuel Finder scheme, via Cheapest Fuel. Contains public sector information licensed under the Open Government Licence v3.0.