General – UK Energy
Britain announced a 25% windfall tax on oil and gas producers’ profits last Thursday, alongside a 15 billion pound ($18.9 billion) package of support for households struggling to meet soaring energy bills.
The move, which will give each UK household a 400 pound discount on their energy bill and more for lowest-income households, marks a change of heart for Prime Minister Boris Johnson’s government, which had previously resisted windfall taxes, calling them a deterrent to investment.
It is the second emergency policy intervention to help with rising bills this year.
Facing intense political pressure to provide more support for people coping with what political opponents and campaigners have called a cost-of-living crisis, finance minister Rishi Sunak said energy firms were making extraordinary profits while Britons struggled.
“We will introduce a temporary and targeted energy profits levy but we have built into the new levy a new investment allowance that means companies will have a new and significant incentive to reinvest their profits,” Sunak told parliament. “The more a company invests, the less tax they will pay.”
Sunak did not refer to it as a windfall tax. He said it would raise 5 billion pounds ($6.30 billion) in the next 12 months and be phased out as oil and gas prices return to normal. He did not set out how the rest of the package would be funded.
He also said there would be a new Investment Allowance that would nearly double the tax relief available for firms on their investments.