The Red Diesel Reform

The Red Diesel Reform

The Red Diesel Reform


The government is making changes to the way Red Diesel is taxed from 1st April 2022.
These new restrictions will result in no tax relief for several industries meaning they can no longer use it.



What is red diesel?

This is diesel that has been dyed red to indicate that it is a tax-free fuel. This is for non-road vehicles meaning the on-road fuel taxes are not due.
The colour is to ensure it can be immediately identified. It should only be used on non-road equipment and machinery which can be utilised across a variety of industries such as construction and farming.


What is changing?

Around 15% of diesel consumption in the UK is red diesel, this contributes millions on tonnes to CO2 every year.
Whilst the government recognises it does still need to offer some sort of tax relief, they are hoping it will encourage businesses to use alternative fuels to reduce their environmental impact.


This means from April 2022 the government is removing the entitlement to use red diesel and rebated biodiesel from most sectors.



Who is affected?

Industries and users exempt from the changes to red diesel taxation include:

– Agriculture, horticulture, forestry and fish farming (this allows vehicles used for agriculture to be used for cutting verges and hedges, snow clearance and gritting roads)

-Rail including passenger, freight and maintenance vehicles that run on rail tracks

-Non-commercial heating and electricity generation (such as off-the-grid homes, places of worship and townhalls)

-Non-commercial power generation (such as hospitals and off-the-grid households)

-Commercial boating industry (including fishing and inland water freight industries and passenger ferries)

-Off-grid power generation; and non-propulsion uses on permanently-moored houseboats

-Travelling funfairs and circuses (for powering the machinery (including caravans))

-Amateur sports clubs and golf courses (including activities such as ground maintenance, and the heating and lighting of clubhouses, changing rooms etc.)


Therefore these industries are still eligible for the tax relief and able to use red diesel.



Industries that will no longer be able to take advantage of red diesel include:

-Construction and road maintenance

-Logistics and haulage (including refrigeration units)

-Mining and quarrying

-Oil and gas extraction

-Waste management

-Commercial heating


-Airport operations and ports

-Manufacturing (such as ceramics, timber and steel)


These industries will see the biggest impact and have to change the way they operate with regards to fuelling their transport and machinery.



How to prepare

Organisations who currently use red diesel who will be impacted by the change need to think about the current stock levels and plan to phase out the fuel, either by using or selling back, if they can no longer use it.


There is the option to research and switch to alternative fuels but costs must be considered, especially for those converting to white diesel which can see an increase of over 40p per litre.


Suppliers will need to consider the change in demand.


Regardless of whether you are a consumer or supplier, planning for the change is critical. It is important to ascertain whether the changes will impact on you and if so, prepare cashflows to ensure the financial changes can be dealt with.



Contact one of our team if you have any questions on 01482 888820.