The Government has announced plans to scrap the oil and gas windfall tax if prices drop for a sustained period.
While the 75% energy profits levy was set to continue until March 2028, a new energy security investment mechanism could see an early end to the levy.
Under the new rules, the tax rate for oil and gas companies will return to 40% if:
- the average oil price falls below $71.40 per barrel
- the average gas price falls below £0.54 per therm for two consecutive quarters.
The levy has raised around £2.8 billion for the Treasury so far, helping the Government support households and businesses with soaring energy bills.
However, the oil and gas industry warns that companies are cutting back on investment as a result of the windfall tax. This could put domestic supply at risk, potentially forcing the UK to import more from abroad.
According to Exchequer Secretary to the Treasury, Gareth Davies, the new measure will allow the Government to provide support for households while protecting the UK oil and gas industry:
"It's important that we secure investment in our own domestic supply, protecting the tens of thousands of British jobs that come with it."
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