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UK: Temporary reductions in transport-related taxes; guidance on taxation of “ecosystem services”; consultation on changes to plastic packaging tax

Proposed tax reductions in response to conflict in the Middle East

May 28, 2026

The Exchequer Secretary to the Treasury published Ministerial Statements on May 20, 2026, and May 21, 2026, detailing planned changes to transport-related taxes including:

  • Extension of 5p fuel duty cut until December 31, 2026, and abandonment of planned increases on September 1, 2026, and December 1, 2026, such that the main rate of fuel duty will remain at 52.95p per liter
  • Cut in duty rate on red diesel from 10.18p per liter to 6.48p per liter from June 15, 2026, until December 31, 2026 
  • £1 fee over next 12 months for renewals of heavy goods vehicle (HGV) vehicle excise duty (VED)
  • Increases to approved mileage allowance payments (AMAPs), mileage allowance relief (MAR), and self-employed mileage rates retroactive to April 6, 2026, for the 2026/2027 tax year (55p per mile for the first 10,000 miles and 25p per mile for mile 10,001 and over)

The government also announced as part of its response to the conflict in the Middle East, a temporarily reduced 5% VAT rate for children's meals, tickets, and family attractions applicable from June 25, 2026, to September 1, 2026.

In other tax-related news, HMRC on May 14, 2026, published guidance on the taxation of various payments made by developers and others to landowners for the provision of “ecosystem services,” such as improvements to water quality, increases in biodiversity, and carbon capture. Guidance is provided for both the person paying for or buying the ecosystem service and the landowner creating the service and covers the implications for income tax, corporation tax, capital gains tax, and VAT, as well as stamp duty land tax and inheritance tax. The guidance is as expected and does not constitute a change in HMRC’s policy but nevertheless is a useful reference document for affected taxpayers. 

In addition, HMRC on May 18, 2026, launched a consultation on the potential introduction of mandatory certification for mechanically recycled plastic for plastic packaging tax (PPT) purposes. Comments are requested by August 10, 2026.

Read a May 2026 report prepared by the KPMG member firm in the UK

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