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Breaking: UK Chancellor announces windfall tax hike on North Sea and electricity generators

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Jeremy Hunt has unveiled a package of windfall tax hikes which he said will raise £14 billion for UK Government coffers.

The Chancellor confirmed that, from January 1, he will increase the North Sea windfall tax from 25% up to 35%, taking the headline rate of tax to 75% for the industry.

The windfall tax will also be extended through to March 2028 from its initial “sunset clause” of 2025.

Meanwhile a new 45% levy on low-carbon electricity generators, such as offshore wind farm owners, will be imposed.

Mr Hunt said it will raise £14bn next year.

He said he supports a windfall tax but “any such tax should be temporary, not deter investment, and recognise the cyclical nature of energy businesses”.

He added: “Taking account of this, I have decided that from January 1 to march 28, we will increase the Energy Profits Levy (EPL) from 25 to 35%.

“The structure of our energy market also creates windfall profits for low-carbon electricity generatio. So from January 1st we’ve decided to introduce a new temporary 45%  levy on electricity generators.

“Together, these measures raise £14bn next year.”

Mr Hunt made no comment on any changes to the investment allowance – a 91% return on investment, designed to reduce payments based on the amount of investment into the North Sea.

How will the industry react? 

When Rishi Sunak first announced the original windfall tax six months ago, he said it would raise £5bn over the next year – Jeremy Hunt’s upgrade is nearly three-times that much, as he delivers a budget to statement to deliver “a consolidation of £55bn”.

The measures announced today broadly confirm reports trailed this month, including a big impact on low-carbon electricity generators – implementing a tax of 45%.

There are fears though that in electricity generator’s coffers, it could hamper future investment.

North Sea industry independents have argued that they are disproportionately impacted by the windfall tax – and warned that an increase could drive investment out of the UK.

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