Farmers handed red diesel tax cut as fuel costs continue to rise

Farmers and hauliers will receive temporary fuel tax relief after the government announced new measures aimed at easing pressure from rising global oil prices.

The Treasury confirmed the current 5p fuel duty cut will remain in place until the end of the year, while red diesel duty for farmers and other eligible users will also be reduced by more than a third over the same period.

The announcement follows calls from the industry for ministers to help farmers facing soaring fuel and production costs linked to the conflict in Iran.

From 15 June, the red diesel duty rate will fall from 10.18p to 6.48p per litre until the end of 2026.

Ministers said the temporary measures were designed to help households and businesses cope with rising fuel costs driven by instability in the Middle East.

For farmers and contractors, the red diesel reduction will bring duty rates down to their lowest level in more than 20 years.

Fuel remains one of the biggest operating costs for many agricultural businesses, particularly during peak machinery, transport and harvesting periods.

Rising diesel costs have also increased pressure on livestock transport, seasonal contracting work and agricultural supply chains across the sector.

The NFU welcomed the announcement, saying it had repeatedly urged government to support farmers facing mounting inflationary pressures since the outbreak of conflict in the Middle East.

NFU President Tom Bradshaw said the union had consistently raised concerns over rising production costs during meetings with Defra ministers.

“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,” he said.

NFU economists said red diesel prices are currently up to 55% higher than before the conflict in Iran, while some members reported even sharper increases during March and April.

Mr Bradshaw said further action could still be taken to help ease pressure on farm businesses and food production costs.

“There are further steps the government could take going forward, such as reversing electricity standing charge increases and delaying CBAM, to help ease production cost pressures for farmers and growers and curb inflation across the food supply chain,” he said.

Hauliers will also receive a 12-month road tax holiday, with vehicle tax renewals reduced to £1.

According to the Treasury, the move will save around £600 for a typical heavy goods vehicle and up to £912 for the largest lorries on UK roads.

Officials said extending the fuel duty cut would save the average driver around £120 by the end of 2026 compared with previous fuel duty rates.

The road tax relief is also expected to support agricultural supply chains by helping reduce transport costs for moving raw materials and produce, with the poultry sector among those heavily affected by rising specialist transport costs.

Prime Minister Keir Starmer said rising global tensions were increasing pressure on households and businesses across the country.

“I know many are feeling the pressure of energy and fuel costs, and are worried about how the conflict in Iran will affect their finances,” he said.

Mr Starmer added that the government was acting to “keep fuel costs down for millions of drivers”.

Chancellor Rachel Reeves said the package would help cut costs for “farmers and hauliers” while protecting households from rising fuel prices.

“The war in Iran is pushing up fuel prices here at home,” she said.

The Treasury said fuel duty on petrol and diesel would remain at its lowest level for more than 16 years under the extension.

However, industry groups warned the temporary measures would not fully offset wider inflationary pressures facing agriculture, transport and rural businesses.

While the support package has been welcomed across the farming and haulage sectors, businesses say fuel and production costs remain significantly above pre-conflict levels heading into the second half of the year.