The government has stated that the windfall tax on oil and gas corporations will be eliminated if prices return to normal levels for an extended time.
If the windfall tax was eliminated, the overall tax rate on energy companies would drop from 75% to 40%.
Companies that gain from circumstances over which they had no control are the targets of a windfall tax.
It was implemented the year before with the intention of funding a programme that would reduce energy costs for homes and businesses.
Recent years have seen record profits for the energy industry, thanks in large part to increased demand following the relaxation of Covid limitations and, more recently, to higher energy costs as a result of Russia’s invasion of Ukraine.
However, the high costs of oil and gas have recently decreased.
If average prices for oil and gas fall to or below a specified level for two consecutive three-month periods, the Treasury has stated it would eliminate the windfall tax, known as the Energy Profits Levy. In any other case, the tax will stay in effect until March of 2028.
Oil at $71.40 per barrel and gas at £0.54 per therm are the new baselines.
On Friday morning, a barrel of Brent crude oil was selling for $75, while the price of a gallon of petrol was approximately $0.62.
