UK Chancellor of the Exchequer Rachel Reeves has decided not to proceed with a proposed early termination of the windfall tax on North Sea oil and gas following a recent rise in commodity prices related to conflict in Iran.
According to a government official who spoke on condition of anonymity about plans that had not been publicly announced, Reeves had been preparing to reveal this week an intention to end the levy earlier than its scheduled March 2030 expiry. That plan has now been shelved in response to the uptick in prices, the person said.
Government ministers have spent months meeting with industry representatives to evaluate the potential effects of ending the Energy Profits Levy ahead of its 2030 sunset. Those discussions continued this week. On Wednesday afternoon Reeves held a meeting with figures from the oil and gas sector, including BP, Adura and the trade body Offshore Energies UK.
The levy was originally introduced by the previous Conservative government after energy prices rose sharply in the wake of Russia's invasion of Ukraine. While prices later eased, successive governments have extended and increased the charge, and the industry's headline tax rate now stands at 78%.
Offshore Energies UK has consistently argued for changes to the levy. Ministers' ongoing engagement with the sector and the decision to stand back from an early withdrawal of the tax reflect the current price environment and the consultations conducted with industry players.
Context and mechanics
The Energy Profits Levy remains scheduled to lapse in March 2030. The recent decision to halt an early termination was described by a government source as a direct response to rising prices linked to conflict in Iran. Details of any future reviews or timelines for reconsideration were not announced.
What was reported
- Reeves had intended to announce a plan this week to end the levy early but has abandoned that plan after prices increased, according to an anonymous government official.
- Ministers have been consulting with the industry for months on the implications of ending the charge before 2030.
- On Wednesday Reeves met with representatives from BP, Adura and Offshore Energies UK.