Energy Profits Levy Extended: HM Treasury's Announcement for Continuation until March 2028
HM Treasury has announced that the Energy Profits Levy will remain in place until March 2028. The Government will introduce a new Energy Security Investment Mechanism to protect domestic energy supply and encourage growth in the sector.
This forms part of the Government’s strategy to support households with energy bills whilst providing certainty to investors to secure the long-term future of domestic energy production. The Energy Profits Levy puts a marginal tax rate of 75% on North Sea oil and gas production. The levy has raised around £2.8 billion to date and is expected to raise almost £26 billion by March 2028, helping to fund the measures to help with the cost of living, such as the Energy Price Guarantee.
Energy Security Investment Mechanism
The Government announced that they will introduce an Energy Security Investment Mechanism to give the oil and gas sector certainty to raise capital and invest in new and existing projects, securing affordable and reliable domestic energy supply. It will mean that if prices fall to historically normal levels for a sustained period the tax rate for oil and gas companies will return to 40%, the rate before the Energy Profits Levy was introduced. This means that if the price drops below the floor the tax will no longer apply.
The Energy Security Investment Mechanism level is calculated from 20-year historic averages based on World Bank data for oil, and Independent Commodity Intelligence Services for gas.
