The UK government has collected an additional £1 billion in Value Added Tax (VAT) from fuel sales, attributed to increased pump prices resulting from the ongoing conflict in Iran. Analysis indicates that motorists have collectively spent an extra £6 billion on fuel since the conflict began on February 28.

This rise in prices has led to a proportional increase in VAT revenue for the Treasury, as the 20 percent levy accounts for a larger sum when pump prices are higher. The RAC Foundation reported that diesel drivers, including tradesmen and hauliers, have paid an additional £4.3 billion, contributing £713 million in extra VAT. Petrol drivers have seen their costs rise by £1.7 billion, with an additional £289 million going to the Treasury as VAT.

These figures have prompted calls for new Chancellor John Healey to use this revenue windfall to cancel a planned increase in Fuel Duty set for the new year. A 5 pence per litre cut in duty, introduced in 2022 following Russia's invasion of Ukraine, is scheduled to expire on January 1. The government is reportedly considering reversing this reduction to fund new Prime Minister Andy Burnham's spending initiatives.

Critics have voiced strong opposition to the potential Fuel Duty hike. Tory shadow transport minister Greg Smith stated that the government is "tax-gouging motorists" and that scrapping the increase is a "moral necessity." Howard Cox, founder of the FairFuelUK campaign, criticized the UK Treasury for benefiting from the price increases while other countries have offered support to their drivers. He urged Mr. Healey to freeze Fuel Duty for the remainder of the parliamentary term, arguing that lower fuel prices stimulate economic growth.

Average petrol prices stood at 161.46 pence per litre on August 12, 2026, while diesel was priced at 181.84 pence per litre. This means filling a typical 55-litre tank costs approximately £15 more for petrol and £20 more for diesel compared to pre-conflict prices.

Fuel prices have been volatile since the Iran conflict began, impacting western oil supplies due to disruptions in the Strait of Hormuz. Prices surged following the conflict's start on February 28 but saw a decline after a tentative peace deal was signed in June. However, prices have risen again after the breakdown of the deal and renewed military action.

Prior to the conflict, approximately 130 ships passed through the Strait of Hormuz daily, carrying about a fifth of global oil supply. Current transit numbers are significantly lower. Brent crude oil prices were around $90 per barrel on August 12, having reached $100 last month. Price changes at the pump typically take several weeks to reflect fluctuations in global oil markets.

The Treasury has indicated that a decision regarding Fuel Duty will be made in Mr. Healey's first Budget, scheduled for October 28.