Policy paper

Air Passenger Duty: banding reforms and rates from 1 April 2023 to 31 March 2024

Published 20 July 2022

Who is likely to be affected

Airlines and other aircraft operators and their passengers.

General description of the measure

The measure will introduce a new domestic band for Air Passenger Duty (APD) for flights within the UK and a new ultra long-haul band, covering destinations with capitals located more than 5,500 miles from London.

The measure will also set Air Passenger Duty rates for the tax year 2023 to 2024. The reduced rate for the domestic band will be set at £6.50 and for the ultra long-haul band at £91. The rates for the short and long-haul bands will increase in line with the retail price index (RPI) as forecast at Autumn Budget 2021.

Policy objective

This measure supports UK air connectivity and aligns Air Passenger Duty more closely with the government’s environmental objectives.

The increases in the short-haul and long-haul rates by the retail price index constitute a real terms freeze. This ensures that Air Passenger Duty receipts are maintained in real terms and that airlines make a fair contribution to the public finances.

Background to the measure

This measure was announced at Autumn Budget 2021 and follows the consultation on aviation tax reform announced at Budget 2020 and published in Spring 2021. The consultation closed on 15 June 2021 and a summary of responses was published at Autumn Budget 2021.

The rates for the tax year 2023 to 2024 were announced at Autumn Budget 2021 to give industry sufficient advance notice of changes in Air Passenger Duty rates.

Detailed proposal

Operative date

This measure will have effect in relation to the carriage of passengers on or after 1 April 2023.

Current law

Section 30 of Finance Act 1994 (FA 94) sets out the rates of Air Passenger Duty, section 30A provides for the setting of the Northern Ireland long haul rates of duty and Schedule 5A sets out the territories in destination bands.

Proposed revisions

Legislation will be introduced in Finance Bill 2022-23 to amend sections 30 and 30A of, and Schedule 5A to FA 94 to reflect the rates and destinations in the restructured bands.

The Air Passenger Duty rates for the tax year 2023 to 2024 will be as follows (from April 2023):

Bands (distance in miles from London)	Reduced rate (lowest class of travel)	Standard rate (1) (other than the lowest class of travel)	Higher rate (2)
Domestic band	£ 6.50	£ 13	£ 78
Band A (0 to 2000 miles)	£ 13	£ 26	£ 78
Band B (2,001 to 5,500 miles)	£ 87	£ 191	£ 574
Band C (over 5,500 miles)	£ 91	£ 200	£ 601

1. If any class of travel provides a seat pitch in excess of 1.016 metres (40 inches) the standard rate is the minimum rate that applies.
2. The higher rate applies to flights aboard aircraft of 20 tonnes and above with fewer than 19 seats.

Summary of impacts

Exchequer impact (£million)

2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027
—	—	-35	-35	-30	-30

These figures are set out in Table 5.1 of the Autumn Budget and Spending Review 2021 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2021.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

The costing includes a behavioural effect to account for the change in flights taken resulting from the change in the tax rates.

Impact on individuals, households and families

This measure will impact on some individuals who travel by air. There is expected to be no impact on passengers who travel to short-haul and long-haul destination as the increase in rates is in line with the retail price index, constituting a real terms freeze. Those individuals who travel to domestic destinations may see a reduction in air fares and those individuals who travel to ultra long-haul destinations may see an increase in air fares.

Customer experience is expected to stay broadly the same because this measure does not change how individuals interact with HMRC.

This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that this measure will have any direct impacts on those in groups sharing protected characteristics. However, Air Passenger Duty is a tax on airlines. The government’s understanding is that airlines ordinarily pass the cost of Air Passenger Duty through to the consumer in ticket prices. This is a commercial decision for the airline. The government has limited evidence on the characteristics of people purchasing airline tickets. However, given the scale of the proposed rate changes, any impact is expected to be small.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on approximately 600 airlines and aircraft operators. One-off costs include familiarisation with the changes and updating systems to include the new bands and rates. It is not expected that there will be any continuing costs.

There is expected to be no impact on civil society organisations.

HMRC customer experience is expected to stay broadly the same because this measure does not change how businesses interact with HMRC.

Operational impact (£million) (HMRC or other)

HMRC will need to make changes to IT systems to implement this change at an estimated cost of £1,350,000.

Other impacts

The total net impact on emissions of the reforms across the forecast period ending 2026 to 2027 is tentatively estimated to be negligible. Other impacts have been considered and none has been identified.

Monitoring and evaluation

The measure will be monitored through information collected from receipts and Air Passenger Duty returns.

Further advice

If you have any questions about this change, contact Ann Little on Telephone: 03000 586096 or email: ann.Little@hmrc.gov.uk