London Daily

Focus on the big picture.
Friday, Mar 06, 2026

How would a UK windfall tax on oil and gas profits work?

How would a UK windfall tax on oil and gas profits work?

Analysis: Sunak hints Labour proposal ‘not off the table’ but criteria suggests very few firms would be penalised
Until this week, the government repeatedly rejected the notion of a windfall tax on oil and gas companies, which have been reaping huge profits from sky-high energy prices.

But the chancellor, Rishi Sunak, hinted at a possible U-turn on Wednesday, telling Mumsnet that such a policy was “never off the table”, and would be looked at if investment by companies in Britain’s energy security failed to materialise.

The idea is that the money raised could be spent on easing the cost of living crisis for those households most under pressure from soaring prices. So what would a windfall tax on oil and gas companies be worth to the Treasury?

Labour has repeatedly argued that a one-off, year-long windfall levy could raise £1.2bn to fund discounts on home energy bills, which are already at a record high of £1,971 for an average dual-fuel tariff, with a further eye-watering rise on the way in October.

The party has proposed levying an extra 10% on the corporation tax paid by oil companies that are active in the North Sea. This would be on top of the 40% rate they pay on their profits, already higher than the 19% headline rate of corporation tax.

This would not only affect well-known firms such as BP and Shell but also lesser-known ones such as Harbour Energy – which actually produces more oil from the North Sea than any other extractor: about 163,000 barrels a day last year.

The sector’s big firms have certainly done extremely well out of the high oil and gas prices that have sent energy bills and the cost of filling up a car to record highs. BP made a profit of £10bn last year, admitting it has “more cash than we know what to do with”. The company was a “cash machine”, its chief executive, Bernard Looney, said – around the same time as dismissing calls for a windfall tax.

Shell did even better at £15bn, after record quarterly earnings in the last three months of 2021. Both companies will report first-quarter figures next week, including any boost connected to the war in Ukraine.

On Wednesday, Sunak appeared to leave the door ajar for a levy – but one that would penalise those oil firms that fail to do their best to help the UK squeeze more drops out of the North Sea.

“What I would say is that if we don’t see that type of investment coming forward and companies are not going to make those investments in our country and energy security, then of course that’s something I would look at and nothing is ever off the table in these things,” he said.

It is not immediately clear how the government would set the criteria for judging which companies are underinvesting. In practice, forecasts of increased investment in the North Sea suggest very few firms, if any, are likely to be penalised under current circumstances.

Spending in the North Sea is forecast to hit £21bn over the next five years, according to a report published last September by the UK oil trade body Offshore Energies UK, a higher annual rate than the £3.7bn of investment in 2020.

Habour Energy, which produces a fraction of either BP or Shell’s global output, increased its spending on new and existing projects from $556m to $640m last year.

It plans to increase its spending further this year, indicating it would be unlikely to fall foul of any penalty for perceived underinvestment.

Shell is already considering a U-turn on its decision to abandon the Cambo oilfield, which lies about 75 miles north-west of the Shetland Islands.

The company said this month it planned to invest £20bn-£25bn in the UK energy system over the next decade, although 75% will be on offshore wind, hydrogen and electric vehicle infrastructure, rather than North Sea oilfields. But it too is planning more extraction.

“We plan to continue to invest in the North Sea,” BP said in its latest annual report.
Newsletter

Related Articles

0:00
0:00
Close
Iceland Supermarket Drops Trademark Challenge Against Icelandic Government in Long-Running Naming Dispute
UK Defence Secretary Visits Cyprus Following Scrutiny of Britain’s Response to Drone Attacks
Questions Grow Over Britain’s Military Readiness as Response to Iran Conflict Draws Scrutiny
UK Offers Failed Asylum Seeker Families Up to Forty Thousand Pounds to Leave Voluntarily
Saharan Dust Could Bring ‘Blood Rain’ to Parts of the UK as Weather Systems Shift
UK Deploys Additional Typhoon Fighter Jets to Qatar and Helicopters to Cyprus Amid Rising Middle East Tensions
Experts Urge Britain to Accelerate Renewable Energy Push as Global Conflicts Drive Up Costs
British Public Shows Strong Reluctance to Join Wider War in Iran
First UK Evacuation Flight Departs Middle East After Lengthy Delay
United Kingdom Imposes New Visa Requirements on Travelers from St. Lucia and Nicaragua
Iran Conflict Strains U.S.–U.K. Alliance as Trump and Starmer Clash Over Military Strategy
UK Interest Rates Could Rise Above Four Percent Again if Energy Shock Continues, Think Tank Warns
Starmer Defends Britain’s Iran Strategy as Badenoch Urges Stronger Military Support
Labour MP Says She Saw No Sign Husband Broke Law After Arrest in China Espionage Investigation
UK Jobless Rate Overtakes Italy’s for First Time in Years as Labour Market Weakens
United Kingdom Suspends Student Visas for Four Countries in Unprecedented Immigration Move
Campaigners Warn UK Student Visa Ban Could Push Migrants Toward Dangerous Channel Crossings
First U.K. Charter Flight for Stranded Nationals Set to Depart Oman Amid Middle East Crisis
France and United Kingdom Deploy Warships to Eastern Mediterranean as Middle East Conflict Escalates
U.K. Arrests Three Men Including Lawmaker’s Partner in Suspected China Espionage Investigation
Trump Says UK–US ‘Special Relationship’ Is Diminished Amid Middle East Dispute
UK Economic Forecasts Face Fresh Strain from Middle East Conflict and Rising Energy Costs
UK Reaffirms Close US Ties After Trump’s Public Criticism
Reeves Stresses Stability and Fiscal Discipline in UK Budget Update as Growth Outlook Shifts
UK Deploys Royal Navy Destroyer HMS Dragon to Cyprus After Drone Strike on RAF Base
Green Party Surges Past Labour in New UK Poll as Traditional Party Support Crumbles
Majority of Britons Oppose U.S. Use of UK Military Bases in Iran Conflict
UK Intensifies Evacuation Efforts from Oman, Working with Airlines to Boost Flight Capacity
Trump Condemns UK and Spain in Unusually Sharp Rift Over Iran Military Action
Trump Repeats UK Claims That Diverge from Verified Facts Amid Diplomatic Strain
UK Arrests Prominent Figures Linked to Epstein Network as Questions Mount Over US Action
Trump Says UK ‘Took Far Too Long’ to Approve Use of Airbases for Iran Strikes
Scope of Britain’s Role in the Expanding Middle East Conflict Comes Under Scrutiny
Trump Says He Is ‘Very Disappointed’ in Starmer Over Iran Comments
U.S. Embassy in Riyadh Struck by Drones Amid Escalating Iran Conflict
Starmer Confronts Strategic Test After Drone Strike Near British Base in Cyprus
Rolls-Royce Chief Signals Openness to Germany Joining UK-Led Fighter Jet Programme
UK Stocks Slip as Escalating Iran Conflict Triggers Global Market Selloff
UK Overhauls Asylum System to Make Refugee Status Temporary
Starmer Warns of ‘Reckless’ Iranian Strikes Amid Escalating Regional Tensions
British Base in Cyprus Targeted as Drones Intercepted Amid Expanding Iran Conflict
Starmer Diverges from Trump on Iran Strategy, Rejects ‘Regime Change from the Skies’
U.S. and Israel Intensify Strikes on Iran as Conflict Expands to Lebanon and Gulf States
Violent Pro-Iranian Protesters Storm U.S. Consulate in Karachi
Missile Debris Sparks Fires at Dubai’s Jebel Ali Port Near Palm Jumeirah
Iran Strikes U.S. Fifth Fleet Headquarters in Bahrain Amid Wider Gulf Retaliation
When the State Replaces the Parent: How Gender Policy Is Redefining Custody and Coercion
Bill Clinton Denies Knowing Woman in Hot Tub Photo During Closed-Door Epstein Deposition
Former U.S. President Bill Clinton Testifies on Ties to Jeffrey Epstein Before Congressional Oversight Committee
Dyson Reaches Settlement in Landmark UK Forced Labour Case
×