The UK government has increased its 25% levy on oil and gas companies – the UK energy profits levy – to 35% from January 2023 as part of its November 17 Autumn statement. The scheme has also been extended by two years to March 2028. Combined with a new 45% windfall tax on the profits of electricity generators, these taxes are predicted to generate £14 billion next year, according to UK chancellor Jeremy Hunt.
But even in normal times, the profits of oil and gas companies that operate in the UK continental shelf are subject to a 40% tax rate, rather than the usual 19% rate on corporate profits. The levy introduces a top-up corporation tax of another 35% (25% before the 2022 autumn statement), raising the rate of tax on the profits of companies such as BP and Shell to 75% from January 2023 (65% until the end of 2022).
