Chancellor confirms increase in air tax next year

Chancellor increases air tax
By Linsey McNeill
07/03/2024
Home » Chancellor confirms increase in air tax next year

Chancellor Jeremy Hunt has confirmed he is pushing up air passenger duty next year to fund tax cuts elsewhere.

The biggest rise is in the rate for premium seats, which the Chancellor said in his Budget announcement is being adjusted to account for high inflation.

The tax on premium seats was already due to rise on 1 April from £13 to £14 for domestic flights, and from £200 to £202 on the longest international flights.

Premium seats are those with a seat pitch of 40 inches or more, so the higher tax applies to business and first class seats but not premium economy, which generally offers a seat pitch of 38-39 inches.

According to documents released by HMRC, there will be no increase in APD for premium domestic seats next year but, from 1 April 2025, the tax for passengers buying premium seats on short-haul flights will rise from £26 to £28, on mid-range flights it will go up from £194 to £216, and on the longest flights it will rise from £202 to £224.

The increase in tax for private flights will rise from £78 to £84 on domestic and short-haul, from £581 to £647 on mid-range, and from £607 to £673 on the longest flights.

The air tax on economy flights will remain the same for domestic and short-haul, but there will be a £2 rise for both mid-haul and the longest flights.

Ian Sinderson, CEO of travel management company ATPI said the further increases will ‘hamper the stuttering recovery of the business travel industry’.

Following the Chancellor’s Budget announcement today, Ian said: “ATPI urges the government to stop treating the travel industry as a bottomless pit of potential taxation and, instead, create a more competitive market for airlines and travellers, in line with the prices enjoyed by our European neighbours.

“British businesses have faced significant headwinds post-pandemic, leading to a cut in business travel spend and slow business travel industry recovery, which is estimated to make up 1% of the UK’s GDP. 

“Increasing Air Passenger Duty in the UK for business travellers – which already sees some of the highest APD rates in the world – may force more travellers to opt for economy tickets or forego travelling for business altogether, which would be catastrophic for this recovering industry.”

Announcing its annual results last month, British Airways confirmed that business travel had been slow to return after the pandemic, but the airline said there had been higher demand from leisure travellers for premium seats. 

The rise in air passenger duty on premium seats is one of a package of measures designed to fund a 2p cut in National Insurance, also announced in the Budget. Other fund-raising measures include scraping tax relief on holiday lets.

UKinbound CEO Joss Croft said the cut in National Insurance, together with a freeze in fuel and alcohol duty, will have a positive impact on the UK tourism industry, but he added: “The absence of a new fiscally positive tax-free shopping scheme is a huge missed opportunity, that would stimulate growth and bring massive and much needed additional export revenue to the UK. 

“This is a shame as international tourism is incredibly competitive, and with the right policies this industry can quickly deliver incredible growth for UK plc in the short and long term.”

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