Energy profits levy to apply to oil and gas companies' extraordinary profits

A windfall tax on the extraordinary profits of oil and gas companies will be introduced to support people most affected by the increased cost of living.

In a statement to the House of Commons on 26 May 2022 Rishi Sunak announced the new temporary energy profits levy charged on oil and gas company profits at a rate of 25% and a new 80% investment allowance to incentivise investment in the sector.

The new levy applies to profits arising on or after 26 May 2022 and is expected to raise £5bn over 12 months. It increases the headline rate of tax on those profits from 40% to 65%. Companies will not be able to offset previous losses or decommissioning expenditure against profits subject to the levy although carry-back and carry-forward of levy losses will be available.

It will be phased out when oil and gas prices...