Repeal the Energy Profits Levy: calculation note

Central fiscal result

+£2.2bn - Net fiscal impact in 2028-29

Low case: +£0.5bn. High case: +£5.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model early repeal of the Energy Profits Levy by 2028-29.
• Central cost is £2.2bn lost receipts.
• Baseline levy rate is 38 percent with expiry in 2030.
• New licensing is modelled separately.

Affected population

• Affected population is UK upstream oil and gas producers.
• Direct beneficiaries are firms with taxable North Sea profits.
• Indirect exposure includes supply-chain workers and Treasury receipts.
• Consumers are not treated as direct beneficiaries.

Gross impact

• Central lost levy receipts: £2.4bn.
• Investment and corporation-tax offset: £0.2bn.
• High case assumes strong prices and high foregone receipts.
• No consumer-bill reduction is scored.

Fiscal build-up, central case

• Lost EPL receipts: +£2.4bn
• Higher corporation-tax receipts: -£0.1bn
• Investment-related receipts: -£0.1bn
• Administration savings: £0.0bn

Central net impact: +£2.2bn in 2028-29.

Behaviour and pass-through

• Low case assumes low prices and weak profits.
• Central case assumes moderate receipts and modest investment response.
• High case assumes high prices and substantial foregone revenue.
• Investment response is not assumed to self-finance repeal.
• Consumer prices follow wholesale markets, not levy incidence.

Phasing

• 2026-27: +£0.4bn. Preparation or partial implementation.
• 2027-28: +£1.8bn. Main ramp-up year.
• 2028-29: +£2.2bn. Target-year central estimate.
• 2029-30: +£2.2bn. Continuation at steady-state assumptions.

Main source groups

• HM Treasury and HMRC, "Energy Profits Levy: reforms 2024" (2024): The note raises the levy to 38%, extends it and removes the investment allowance; defines the oil-and-gas tax baseline.
• Office for Budget Responsibility, "Economic and fiscal outlook: October 2024" (2024): The OBR scores fuel-duty, EPL and environmental-receipts measures and discusses oil-and-gas uncertainty; anchors energy and motoring estimates.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Mirrlees and review team, "Tax by Design: The Mirrlees Review" (Institute for Fiscal Studies and Oxford University Press, 2011): Efficient tax systems use broad bases, coherent rates and few arbitrary reliefs; frames the efficiency trade-off when tax cuts are not matched by credible funding.
• Saez, Slemrod and Giertz, "The Elasticity of Taxable Income with Respect to Marginal Tax Rates" (Journal of Economic Literature, 2012): Higher-income taxpayers respond more strongly to tax-rate changes through avoidance, timing and real behaviour; important where the policy changes top-pay, capital or business-tax incentives.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.