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Thursday, Oct 09, 2025

UK lawmakers approve windfall tax on oil and gas producers

UK lawmakers approve windfall tax on oil and gas producers

British lawmakers approved a 25% windfall tax on oil and gas producers in the British North Sea on Monday, which the government says will raise 5 billion pounds ($5.95 billion) in one year to help people struggling with soaring energy bills.
The Energy Profits Levy will target profits made from a spike in oil and gas prices as energy demand is going up after pandemic lockdowns ended and the Russia-Ukraine conflict started.

The tax bill still has to pass through the upper legislative chamber known as the House of Lords to become law. The Lords can seek to amend a bill, but very rarely try to block legislation outright.

The tax was first announced by the Conservative government on May 26 and was met with critiques from oil and gas companies that it would shrink investment and domestic production.

The government says an investment incentive, which means firms could receive a 91 pence tax relief on every pound ($1.19) spent on new oil and gas extraction, would underpin energy security.

In response to a consultation, the government tweaked the bill to include a firm end date in 2025 and to allow firms to offset against the tax the cost of decommissioning old fields and investing in the electrification of producing fields.Climate activists and opposition politicians have criticised the incentive mechanism in the bill for failing to offer tax advantages for renewable power projects.

Mike Tholen, sustainability director at oil and gas industry association Offshore Energy UK, said the industry is still concerned about how the tax will impact energy supplies, but recognises that the government has listened to concerns.

"We now ask that they continue to actively engage with the sector as the Levy unfolds, and take into account our further recommendations," Tholen said in an emailed statement.

($1 = 0.8400 pounds)
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