Air Passenger Duty (APD): banding reforms and rates from 1 April 2023 to 31 March 2024
Published 15 March 2023
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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 RPI 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 Spring Finance Bill 2023 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 1 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 (0-2000 miles) | £13 | £26 | £78 |
| Band B (2,000–5,500 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 (£m)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| 0 | -45 | -45 | -50 | -50 | -45 |
These figures are set out in Table 4.2 of Spring Budget 2023 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2023.
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 RPI, 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 APD 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 (£m) (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, please contact Ann Little on Telephone: 03000 586096 or email: Ann.Little@hmrc.gov.uk.