The Chancellor Rishi Sunak has today announced a raft of support measures to deal with the rising costs of living including a temporary windfall tax for oil and gas companies and extra payments to low-income families.
The windfall tax or 'Targeted Energy Profits Levy' will be temporary and will be phased out once oil and gas prices return to historically 'normal levels':
- The levy will be set at 25% of profits and will apply to the company's ring-fenced profits from 26 May 2022. This will take the combined tax rate for these companies up to 65%.
- The tax base will be computed in a similar manner to the existing taxes which apply to oil and gas companies, i.e. the Ring Fence Corporation Tax and Supplementary Charge.
- There will be a new 80% investment allowance similar to the Superdeduction allowance which will allow oil and gas companies who reinvest their profits to obtain tax relief for up to 91p of every £1 they reinvest.
Although the levy will not apply to the electricity generation sector, as they benefit from high gas prices the government is consulting with both them and investors to drive forward energy market reforms and evaluate appropriate steps to take with respect to the extraordinary profits currently being made by the sector.
This will raise additional revenue of £5bn over the next year which will be used to fund the following support for individuals:
- A one-off lump-sum payment of £650 for low-income families across the UK who receive means-tested benefits. This will be paid in July and in the Autumn, directly into people's bank accounts meaning no claim is needed.
- Additional payments of £300 to pensioners who receive the winter fuel payment.
- The triple lock will be maintained for pensioners.
- Those in receipt of non-means test disability benefits will receive a payment of £150. They are also eligible for the £650 uplift.
- Benefits to be uprated next year based on the Consumer Price Index (CPI) which is expected to be much higher than forecast inflation.
- The already announced £200 energy rebate to be doubled to £400 and will no longer be repayable. This will be payable to individuals in England, Scotland and Wales.
- There will be a £500m increase to the Household Support Fund which is administered by local authorities and helps those in the most need with payments towards the rising cost of food, energy, and water bills.