UK Government to overhaul North Sea tax regime after energy profits levy ends in 2030

The windfall tax on oil and gas companies will end in 2030, the UK Government has confirmed.

But ministers will begin consulting on a new tax regime for the sector, with one proposal to peg tax to oil and gas prices.

The energy profits levy was introduced in 2022 by Rishi Sunak’s government, with the aim of using a tax on excessive profits to cover the cost of support for household bills.

It came after sharp increases in oil and gas prices following Russia’s invasion of Ukraine.

Initially set at 25 per cent, it was due to expire at the end of 2025. Labour pledged during the general election campaign to extend and increase it.

It did so from November last year, putting the levy up to 38 per cent and creating a new end-point of 31 March 2030.

The Treasury have now confirmed the levy will not be extended beyond that point and instead it will consult on permanent tax plans for beyond 2030.

Exchequer secretary to the Treasury James Murray said: “We are committed to working together with the sector on the future of the North Sea by providing the stability they need to keep investing and supporting jobs across the country while ensuring they make a fair contribution at times of unusually high prices.”

Separately, the UK Government has launched a fresh consultation on the future of the North Sea, with a focus on driving the development of clean offshore energy.

It includes how to deliver the commitment not to issue new licences to explore new oil and gas fields, as well as ensuring there is a “coordinated plan” for a just transition which protects jobs.

Energy secretary Ed Miliband said: “Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our Plan for Change and clean energy future in the decades ahead. 

 “This consultation is about a dialogue with North Sea communities – businesses, trade unions, workers, environmental groups and communities – to develop a plan that enables us to take advantage of the tremendous opportunities of the years ahead.”

Other proposals in the consultation include changes to the regulator, the North Sea Transition Authority, and revised environmental guidance for already-licensed projects.

Scottish Secretary Ian Murray said: “Scotland is at the heart of the UK Government's clean energy future. We know the existing oil and gas fields in the North Sea will be with us for decades and a crucial part of our energy mix.

“Through our Plan for Change we are working to ensure our vital energy sector continues to deliver economic growth and skilled jobs in local communities both in the north east of Scotland and across the country for generations to come.”