Chancellor Rachel Reeves is understood to be considering axing the windfall tax on the UK’s oil and gas industry earlier than expected.
Reports suggest the Treasury is floating using her Autumn Budget on November 26 to end the energy profits tax in March 2029.
This would effectively reverse a decision made in last year’s fiscal statement to extend it by one year, until March 2030, The Financial Times reports.
Introduced by former Conservative Chancellor Jeremy Hunt, the Energy Profits Levy has targeted oil and gas firms on the basis that these companies were benefits from profits far beyond normal levels due to the price chock resulting from Russia’s invasion of Ukraine.
The Chancellor is understood to be considering changes to the Energy Profits Levy
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Initially, the levy added a 25 per cent charge on top of the existing tax regime but has since been increased in stages to 38 per cent.
Critics note that this means the overall effective tax rate on North Sea production now sits at roughly 78 per cent.
While it was originally billed as temporary, the levy has been extended to run until March 2030, with a mechanism allowing it to fall away earlier if oil and gas prices drop back to more historically “normal” levels.
The tax also contains investment allowances intended to encourage firms to continue investing in UK extraction and decarbonisation projects, though industry groups argue that the frequent changes and extensions have undermined confidence and contributed to uncertainty around long-term investment plans.
As well as this, analysts have warned the hiked tax costs for the oil and gas industry are leading to higher energy bills for Britons as companies look for ways to ease the cost.
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