Farming to retain red diesel tax relief, Chancellor confirms

Red diesel subsidies will be scrapped but there will be exemptions for agriculture, rail and heating, Rishi Sunak has announced
Red diesel subsidies will be scrapped but there will be exemptions for agriculture, rail and heating, Rishi Sunak has announced

The agricultural industry will retain the red diesel tax relief, the Chancellor of the Exchequer has announced in today's Budget.

Rishi Sunak said the agricultural industry will retain the red diesel exemption amid significant concerns the government was going to scrap it.

The Chancellor did, however, announce that the tax break will be abolished for 'most sectors' as it 'funds pollution'.

The move is part of wider measures to ensure the United Kingdom reaches its net zero ambitions by 2050.



Speaking in the House of Commons on Wednesday (11 March), he said the change will not take effect for another two years.

"This is a tax relief on nearly 14 million tonnes of carbon dioxide every year," he told MPs.



"It’s been a £2.4bn tax break for pollution that’s also hindered the development of cleaner alternatives. So I will abolish the tax relief for most sectors."

But Mr Sunak added: "I've heard the concerns about agriculture, particularly from the NFU and rural colleagues, so I've decided that agriculture will retain the relief."

Responding to the announcement, the NFU applauded the Chancellor for recognising the importance of the red diesel rate for British farmers.

The agricultural industry highlighted its fears that any changes to red diesel duty would see farmers face increases of nearly 50p per litre.

Red diesel currently has a duty of 11.1p per litre compared with 57.7p for standard diesel.

NFU President Minette Batters said: "This is absolutely crucial and we are pleased to see the Chancellor has acknowledged our concerns.



“Changes to this duty could have virtually doubled fuel costs for farmers and with no current alternative fuel for agricultural vehicles, this would have left farms immediately uncompetitive with many other countries who continue to provide lower fuel duty for their agricultural industries.

“This lower fuel duty on red diesel recognises its importance to farm businesses, their ability to produce food for the nation and the fact this machinery is mainly used off-road on farms."