Red diesel subsidy changes

How will it impact businesses with forklifts?

Red diesel has long been a popular fuel for forklift trucks (FLTs) thanks to its lower rate of tax – but that’s all about to change. From 1st April 2022, FLT operators and most other sectors (apart from those exempt), will lose their entitlement to use red diesel and rebated biodiesel, as the government looks to meet its climate change and air quality targets. The result? Diesel powered FLTs are about to become substantially more expensive to operate.

Here’s an outline of everything you need to know about the imminent subsidy changes, including how it might impact your business, and how you can avoid hefty diesel fuel price hikes and become greener with liquefied petroleum gas (LPG).

What is red diesel?

Red diesel is exactly the same as white diesel (also known as gas oil), but it’s marked with red dye and is currently taxed at a much lower rate. There are strict rules about how and when it’s used, so dying it red makes it easily identifiable and helps prevent against illegal use. When fuel duty was first introduced, it was originally only intended for ‘on road’ vehicles, and rebated red diesel was a concession that was given to ‘off-road’ vehicles and machinery, such as FLTs, power generators and commercial heaters. There’s a marked price difference between the two: white diesel has a fuel duty rate of 57.95[1] pence per litre (ppl), whereas red diesel is entitled to a rebate of 46.81 ppl, making it just 11.14 ppl.

What’s changing and why?

At Budget 2020, the government announced it would be removing the entitlement to use red diesel and rebated biodiesel for most sectors and applications from April 2022. This excludes agriculture, rail, and non-commercial heating, which all still qualify for the concession. This subsidy change comes as the government looks to meet its legally-binding target to bring greenhouse gas emissions to net zero by 2050 and to combat air pollution – one of the most prevalent ongoing threats to public health in the UK[2].  Red diesel is responsible for nearly 14 million[3] tonnes of CO2 in the UK each year, as well as causing harmful nitrogen oxide and particulate matter emissions.

Businesses no longer eligible for red diesel tax relief will be taxed at the standard rate from April 2022 to reflect the harmful emissions they emit, which means they’ll be paying more than five times as much duty as before. The aim is to incentivise users to move away from polluting diesel and invest in lower carbon alternatives as well as more energy efficient vehicles and machinery.

How can businesses prepare?

To stay compliant with the new legislation, businesses are being urged to run down their existing red diesel stocks before 1st April 2022. Registered users will have to prove that they haven’t purchased any red diesel after this deadline and that they haven’t stockpiled it in advance. Vehicles found running on rebated fuel unlawfully will be liable to be seized, so make sure you keep a proper paper trail of invoices and receipts proving you have paid full duty after this date. 

In the run up to April 2022, businesses are being encouraged to forward plan. This means measuring current red diesel storage levels, calculating when supply will likely run out and planning alternative fuel replacements or machinery to ensure a smooth transition. If you have any surplus fuel after 31st March 2022, you’ll need to either sell or give it to someone still eligible, or a Registered Dealer in Controlled Oil (RDCO). The other option is to dispose of it through an approved waste oil recycling or disposal company. Either way, make sure you keep official records.

Why is LPG a better fuel for FLTs?

LPG is the perfect solution for businesses looking to keep productivity high whilst making significant savings. As well as being cheaper than diesel, LPG is much cleaner too[4]. It produces far fewer carbon emissions, particulate matter, and nitrogen oxides, helping companies comply with increasingly stringent environmental legislation. It also doesn’t leave any unwanted diesel soot on valuable produce – a particular concern when handling food, pharmaceuticals, or textiles.

LPG-powered FLTs have a better power-to-weight ratio than diesel models as well as more responsive engines that last for longer[5]. Businesses with larger FLT fleets can have their own refuelling station so vehicles can be refilled quickly and easily when needed. For smaller operations with fewer FLTs, there are compact and efficient cylinders that can be changed in minutes.

LPG vs Electric – what’s better?

Electric FLTs are also a popular choice for those searching for greener alternatives. They are much cleaner than diesel and eliminate harmful emissions, plus they’re quieter and typically more compact and manoeuvrable. However, they do have their limitations, including charging constraints and not being suitable for prolonged periods outside or during bad weather.

LPG trucks don’t have any of these drawbacks, plus you’ll never have to worry about power cuts disrupting activity. Compared to electric models, LPG FLTs are more powerful, more reliable and provide superior operational flexibility as they can be used both indoors and out. They are also cheaper to buy[6] and there’s no need for costly recharging equipment, batteries, or battery disposal. Refuelling with LPG is also much quicker, helping to boost productivity whilst keeping unwanted downtime to a minimum.

Keen to switch to LPG forklifts?

If the forthcoming subsidy changes mean you’re now looking to move away from diesel, LPG FLTs will save you money, improve your efficiency and lower your emissions, all whilst providing superior power, flexibility, and lower upfront costs than electric models. Find out more or contact our expert team: / 0808 3010 596.

For more government guidance about changes to rebated fuel entitlements click here.






[6] LPG for Forklift Trucks (WLPGA)