In his Autumn Statement 2022, the Chancellor, Jeremy Hunt, announced an increase to the Energy Profits Levy on oil and gas companies together with a new temporary Electricity Generator Levy.

Both of these new measures are to be legislated for in Spring Finance Bill 2023 and are due to end on 31 March 2028.

The Energy Profits Levy

The Energy Profits Levy was introduced in May 2022 by Prime Minister Rishi Sunak when he was Chancellor.

It was originally set at 25% of the company's ring-fenced profits with an 80% investment allowance to allow oil and gas companies who reinvested their profits to obtain tax relief for up to 91p of every £1 they reinvested.

From 1 January 2023

  • The rate of the levy will increase to 35%.
  • The investment allowance will be reduced to 29% other than where the expenditure relates to decarbonisation.

The EPL is now forecast to raise £40bn by 2028.

The Electricity Generator Levy

The levy is to apply to corporate groups, or, where relevant, standalone companies, that:

  • Are connected to either a national grid or local distribution network.
  • Undertake electricity generation in the UK from nuclear, renewable and biomass sources. Gas generation, pumped storage hydroelectricity, battery storage, coal and oil are excluded from the levy.

From 1 January 2023

  • Extraordinary returns from low-carbon UK electricity generation will be subject to a temporary 45% tax.
  • ‘Extraordinary returns’ will be defined as the aggregate revenue that generators make in a period from in-scope generation at an average output price above £75/MWh.
  • The tax will only apply to generators whose in-scope generation output exceeds 100GWh across a period, and to extraordinary returns exceeding £10 million, on a group-wide basis.

This levy is expected to raise £14.2bn by 2028.

Useful guides on this topic

Autumn Statement: At a glance
The Chancellor, Jeremy Hunt has presented his Autumn Statement 2022. This is the UK's third fiscal event this Autumn. The Autumn statement was accompanied by the Office of Budget Responsibilities' report.

External link

Autumn statement 2022

Electricity generator levy: technical note

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