Red diesel rule changes April 2022

In 2019, the UK became the first major economy to pass laws guaranteeing an end to its contribution to global warming by 2050. This target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared to the previous target of an 80% reduction from 1990’s levels. The government also announced in 2019 a new strategy to clean up the air, as air pollution is one of the biggest continuing threats to public health in the UK.

Rebated diesel, known as red diesel, was at the forefront of the government’s announcement. Red diesel is just like standard diesel but is dyed red to make it identifiable because it is taxed at a much lower rate, therefore, it’s largely illegal to use on public roads. Red diesel is used mainly for off-road purposes, such as in the construction industry, or to power drills for oil extraction. It accounts for roughly 15% of all the diesel used in the UK and is responsible for the production of nearly 14 million tonnes of carbon dioxide a year. The typical fuel duty on standard diesel is 57.95p, whereas using red diesel the fuel duty drops to 11.14p, a total saving of 46.81p per litre.

In the 2020 Budget, the government announced that it would remove the entitlement to use red diesel and rebated biodiesel. The only sectors eligible to use red diesel is agriculture (as well as horticulture, forestry, and fish farming), rail and non-commercial heating. Estimates from Research Management Association Scotland, expect that operating costs to rise by roughly 15% for all firms effected by the law change. The government believes that the tax changes will ensure that most users of red diesel use fuel taxed at the standard rate for diesel from April 2022, like motorists, which more fairly reflects the harmful impact of the emissions they produce. The government is also hoping that removing red diesel entitlements will also help to ensure that the tax system incentivises users of polluting fuels like diesel to improve the energy efficiency of their vehicles and machinery, invest in cleaner alternatives, or just use less fuel.