What is red diesel and which sectors will Friday's rule change impact?

By ITV News Content Producer Alex Binley

Many in the UK are already being squeezed by a cost of living crisis and will see their bills rise even further over the coming days as the new financial year begins in April and brings with it a host of hiked prices.

However, it's not just household bills which are set to soar but those for businesses too.

Many companies will end up paying thousands of pounds extra for fuel as rules restricting the use of red diesel come into force.

So what is red diesel and who will be affected?What is red diesel?

Red - short for rebated - diesel is the same as standard or white diesel used in cars, but is dyed red to make it easily identifiable because it is taxed at a much lower rate.

It's mostly illegal to use red diesel on public roads, and is used by vehicles in sectors such as farming and construction.

Before the Spring Statement, fuel duty in the UK was 58p per litre (meaning 58p in tax is paid on every litre of fuel you buy), and this was cut by 5p last week to 53p per litre on petrol and diesel. However, only 11p is paid per litre of red diesel, meaning it is much cheaper.

What's changing?

From Friday, April 1, some sectors which currently use red diesel will no longer be allowed to.

Is anything else changing?

As well as red diesel, the following fuels will also be impacted by the changes:

• rebated Hydrotreated Vegetable Oil (HVO)

• rebated biodiesel and bioblend

• kerosene taxed at the rebated diesel rate

• fuel substitutes

However, these are not used as much as red diesel.

Why is this coming into force?

HM Revenue and Customs (HMRC) has said the new restrictions are designed to help meet "climate change and air quality targets" and "more fairly reflects the harmful impact of the emissions" red diesel produces.

The government has set the target of the UK being carbon neutral by 2050.

The Treasury said that ending the rebate "will 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".

It added that red diesel accounts for around 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. Red diesel used in the construction and infrastructure building sectors was also estimated to have caused 7% of nitrogen oxide emissions and 8% of PM10 emissions (a type of particulate matter) in London in 2018. 

Which sectors will this affect?

From Friday, the following industries will no longer be able to use red diesel:

• construction

• recycling plants

Which sectors can still use red diesel?

The following sectors can still use red diesel:

• agriculture

• horticulture

• fish farming

• forestry

• trains

• non-commercial heating

• the maintenance of amateur sports clubs and golf courses

• fuel for all marine craft refuelling and operating in the UK, apart from leisure vessels in Northern Ireland

• for powering the machinery used in travelling fairs

Did we know about this?

Yes, it was announced by the chancellor in the 2020 Budget and the date given for when it would come into force.