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Air Passenger Duty for 12+ hour flights to rise to fund domestic cuts – consultation

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The Government published a consultation paper yesterday on reforms to Air Passenger Duty. You can download it from this page of gov.uk.

The level of domestic Air Passenger Duty has become a political issue. When Flybe failed, one reason it gave was that the level of APD – £26 on a return domestic economy flight – was wrecking its economics.

It has also became a football in the UK ‘levelling up’ agenda. With most European countries not having any similar taxes, or not at the same level, it can be cheaper to fly to Munich than Manchester. You would only be paying the £13 economy Air Passenger Duty on the outbound flight rather than on both legs.

Few Governments have ever voluntarily cut stealth taxes, of course. Air Passenger Duty raised £3.6 billion in the 2019/20 tax year, and would have been higher had covid not cut into travel towards the end of the tax year.

As the consultation paper admits, it is also “easy to collect”.

What does the consultation paper suggest?

The Government is suggesting that:

  • domestic Air Passenger Duty be halved
  • Air Passenger Duty be increased on flights over 5,500 miles

There are two proposals for halving domestic APD

For some odd reason, the Government wants to debate two different ways of halving domestic Air Passenger Duty. One is totally stupid and one is blindingly obvious.

The stupid route is to make the return leg of a domestic flight ‘APD free’.

You can instantly see the problem here. If your domestic flight is booked as 2 x one-way flights, the full £26 of Air Passenger Duty will still need to be paid. Only a return booking on a single booking reference would qualify.

As the consultation admits, this would require both flights to be taken with the same carrier. It also screws passengers who only require a single trip or are returning by another mode of transport.

Another problem, not mentioned in the consultation, is that this is likely to reduce competition on domestic routes. Because booking return flights with the same carrier will be cheaper than two single tickets with different carriers, it makes sense for routes to become monopolies.

The sensible route, option two in the consultation, is to halve APD for domestic flights to £6.50 each way.

It is hard to believe that there is even going to be a discussion on which option is better.

The only quirk is that APD in Scotland is to be devolved to the Scottish Government, although this will not happen until agreement is reached on the ‘Highlands and Islands Exemption’.

How will APD increase for longer flights?

This is what you currently pay as Air Passenger Duty:

Air Passenger duty bands

As you can see, the cut-off is at 2,000 miles which is approximately a four hour flight. There is no distinction between, say, Tel Aviv and Tokyo.

There are two proposals for change:

  • Revert to the pre-2008 structure of bands at 2,000 miles, 4,000 miles and 6,000 miles
  • Create one additional band at 5,500 miles

The original pre-2008 scheme was scrapped because it created certain disparities. The banding is based on the distance between London and the capital city of the destination country. This meant that the US West Coast was in a low band, because Washington is on the East Coast.

The preferred choice in the consulation is for the 5,500 mile option. This would take in cities such as Tokyo, Cape Town, Mexico City and Bangkok. It would not include the US West Coast, even if the rules were changed to base it on the exact distance rather than the difference between capital cities.

How much would APD be for the 5,500+ mile band?

No indication is given.

How about a frequent flyer levy?

The consultation also suggests launching a frequent flyer lever.

This would require you to submit details of all of your annual flights to the Government. An additional tax bill would be generated based on your annual travel.

The Government is not keen on this option but it is part of the consultation.

What happens next?

The consultation is open until 14th June.

If you wish to make a submission, details are in the paper. You can download the consultation document here.

Category

General

Comments (123)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Catalan says:
    24 Mar24 March 08:14

    APD is like an addictive drug to the British government. They know it’s bad for the economy but they just need more and more, increasing their dosage every year to hit their high!

    • BuildBackBetter says:
      24 Mar24 March 08:51

      Why is it bad for economy? It’s not like poor people fly dozens of flights every year.
      It’s just another indirect tax like VAT but targeted at those flying.

      • Andrew says:
        24 Mar24 March 09:08

        The world has changed. Domestic and European flights (in normal times) are just buses full of normal people flying to and from work and seeing families.

        Why not start with a different outlook, and set APD at 50% of one hour’sliving wage per leg on a domestic?

        Maybe set the maximum local authority charge for a day’s parking to be the same?

        • Ken says:
          24 Mar24 March 09:43

          The actual figures from England are more like;

          1% of people take 20% of international flights.

          48% of people don’t take any flights in a year.

          Not really like buses at all.

          • Paul says:
            24 Mar24 March 09:50

            So what are the numbers for bus users then? Perhaps 1% of people take 20% of bus journeys, and 48% never use a bus?

          • Andrew says:
            24 Mar24 March 11:06

            So 80% of International flights are taken by ordinary working families and retired peole.

            And you’ve just proven how similar buses and planes are!

            48% of people don’t take any flights in a year.
            and, according to the ONS…
            49% of people don’t take a bus in a year.

    • Yorkieflyer says:
      24 Mar24 March 09:50

      Frequent flyers may see the APD on their redemption flights whereas the vast majority who buy cash tickets don’t. In reality APD is an easy revenue earner and nothing to do with being green and purely a cost to airlines domestic or otherwise. A further hammer blow to the UK aviation industry

      • BuildBackBetter says:
        24 Mar24 March 09:53

        Agree with easy revenue earner. Not really a hammer to UK aviation. It reduces profits of airlines as they are forced to keeps prices low due to competition, including competition from connections.

  • TeesTraveller says:
    24 Mar24 March 08:55

    First of all I 100% agree with reducing domestic APD ASAP – the £6.50 each way would seem fine to me. But there should be a wholesale review of how APD is collected.

    Perhaps we could take some pointers from the way company cars are taxed if we looking at ways that the tax system could drive behavioural change. 20 years ago, when I first got a company car (a Vectra SRi belching out a mighty 212g of CO2/km), the company car tax payable was a factor of the list price of the car and my annual business mileage. However since 2002, the system has been based on a factor of the list price and the CO2 emissions of the car with the thresholds gradually being tweaked over the years to “encourage” drivers to choose cars with lower emissions. This has clearly had an effect on my car choice as the CO2 emissions on my cars have gone from 212 (the Vectra) > 152 > 134 > 119 > 103 (re-evaluated at 121 after the emissions scandal) > 112 (current car) and next time it will be an electric vehicle. It would be cost prohibitive for the majority of company car drivers to choose a high emitting car today due to the tax bill they will incur.

    Now, if APD followed a similar system and the tax due was dependent on the actual emissions of the aircraft scheduled on the route, it would encourage airlines to fly newer, more efficient planes on their UK routes. Either customers would see a price advantage in picking the airline with less polluting planes or the airline would be able to charge more for their newer aircraft, knowing that the end customer price would come down as there would be less APD to pay than their competitors operating planes with higher emissions.

    • Liam says:
      24 Mar24 March 09:24

      Only problem with this is that flights are planned and paid for months in advance but due to unexpected issues you can have a switch of model due to fly the route the day before or even on the day.
      Would the airline then have to take the hit and pay if the replacement plane was more polluting?
      Would they attempt to recover this from the passenger?
      Or would they, as I expect, plan for the potential that this might happen and charge an extra premium on all tickets to cover for it.

      I do like this idea though, just feel it does open up some more questions.

      • The real John says:
        24 Mar24 March 09:57

        They can only charge a premium in a captive market otherwise competitive pressures would give an advantage to airlines who can manage their fleet more efficiently. Well, that’s the theory anyway

      • TeesTraveller says:
        24 Mar24 March 10:21

        My thought was it would be based on the aircraft type scheduled to operate the route (clearly there would need to be something in place to stop airlines scheduling A350s but flying 747s all the time). The current APD legislation allows for people to be upgraded by the airline for operational reasons without any additional APD due to be paid so there is already flexibility.

    • Andrew says:
      24 Mar24 March 09:55

      “it would encourage airlines to fly newer, more efficient planes”

      Great in theory but in reality it would encourage airlines to scrap (or pass on to another airline) perfectly servicable planes and replace them. I suspect the environmental benefits of a new efficient plane take a long time to outweigh that plane’s construction.

      • TeesTraveller says:
        24 Mar24 March 10:29

        But isn’t that what happens (to a lesser degree) today? BA just sold of all their small Embraer’s and some of the 747s went to Russia.

        • Andrew says:
          24 Mar24 March 10:41

          Not quite. BA are currently getting rid of planes that are surplus to requirements and it makes sense to get rid of the least efficient ones first. They’re not getting rid of the 747s for environmental reasons.
          Even prior to covid BA were only very slowly refreshing their fleet. Speeding up that process (by increading the economic cost difference between efficient and relatively inefficient planes) would ultimately have had a detrimental environmental affect.

          • TeesTraveller says:
            24 Mar24 March 12:30

            Of course they are but efficiency and environment go hand in hand to some degree.

            Governments should be (and are) encouraging people to replace inefficient boilers, cars, insulation etc as a way of reducing emissions and the tax system is a big part of it. Aeroplanes should be no different – the fact that they can be sold on to be used elsewhere should not stop us doing things in the UK. If we had the attitude of “there’s no point doing anything about the environment because whatever we do is a drop in the ocean compared to India/China” then we might as well give up on all environmental policy.

          • Doug M says:
            24 Mar24 March 14:07

            @Tees. My issue with the efficiency ruse is that no consideration is placed on the environmental impact of the manufacture of the new car/plane/item versus the efficiency gain. If you’d continued to drive your Vectra for 15 years what would be the environmental cost of that versus the saving from the new cars when you account for the manufacture of the new ones. Efficiency gains are always thrown into the mix the justify more consumption.

          • Andrew says:
            24 Mar24 March 17:35

            Doug’s expressed the point I was trying to make far better than I did. If efficiency of the new vehicle was all that mattered then we’d be trading in our cars every single year for a new, slightly cleaner one claiming that it was good for the environment. Almost certainly the environmental benefit of that new vehicle over the old one in a single year would not be enough to offset it’s manufacture.

            A quick bit of research for example suggests that simply manufacturing the batteries in a Tesla releases as much CO2 as 8 years of conventional driving. Given that Tesla only guarantee their batteries for 8 years then the lifetime environmental benefits of an electric vehicle are a lot less clear cut. That’ll only change when pratically all energy comes from renewable sources which sadly isn’t the case just yet.

  • ChasP says:
    24 Mar24 March 09:03

    My biggest gripe (other than its existence) is the fact that there are only 2 levels so that PE pays the same as First

    Oh and a frequent flyer levy shouldn’t be that hard to organise – make Avios a taxable benefit

    • Nadeshka says:
      24 Mar24 March 09:44

      But a lot (and in the last year I would say most) avios are not generated by flying itself.
      I collect avios almost exclusively through spending, and redeem for a long haul flight every 1-2 years. Does that make me much more of a frequent flyer than someone who flies 5+ times a year to Spain?
      I think it would have to be based on actual legs/distance flown and not just on frequent flyer miles which a lot of people don’t collect. Otherwise you can end up with unintended consequences – e.g. people diverting to collect Hotel & other loyalty points instead of airlines.

      • BuildBackBetter says:
        24 Mar24 March 09:58

        Or find a way to tax the elite miles given for actual flying. But it can end being too complex and there’d be loopholes. For example, BA can add a new booking class with no elite miles, but with other benefits.

    • The real John says:
      24 Mar24 March 09:57

      And if you don’t use avios?

    • Chaz says:
      24 Mar24 March 10:12

      Making Avios a taxable benefit is opening a can of worms. If Avios are a taxable benefit, what about Caffe Nero loyalty card – if I buy nine coffees for work, should the “free” one be a taxable benefit? I know there is a big difference between coffee and airlines but where to draw the line? They both are a benefit from doing thing for work that work has paid for, with the benefit being mine.

      What about Amex points – I could buy coffee or airline miles with them? Would my tax somehow depend on where I spend them?

      It would be too complex to even contemplate.

    • AJA says:
      24 Mar24 March 11:11

      The cost of administering and collecting tax on Avios would outweigh the revenue raised from it. As others have said what about other loyalty schemes? Make them taxable as well? And what about when you swap one for another eg MR to Avios or Avios to Nectar? Do you pay tax a second time?

      As for only two levels of APD I think the idea is that it is to keep it simple. Besides with the number of First class seats disappearing it soon won’t be an issue.

    • Andrew says:
      24 Mar24 March 11:49

      “Oh and a frequent flyer levy shouldn’t be that hard to organise”

      Frequent fliers are, typically, people travelling for work and business – ie contributing to the economy, and therefore tax revenue.

      It is perverse to wish to penalise this.

      • Callum says:
        24 Mar24 March 12:44

        No it’s not perverse, it’s merely a different priority… Perhaps you’re obsessed with the economy and making money, some people care more about creating a habitable planet. Granted doing so benefits future generations more than ourselves – perhaps that’s the issue?

    • memesweeper says:
      24 Mar24 March 13:53

      “make Avios a taxable benefit“

      many folks won’t be adding their BAEC number to their booking in that case.

      The reverse of the frequent levy would make more sense and be easier to administer — each UK taxpayer gets 2 * 50% off APD refund vouchers per year from HMRC — then double APD to make up the losses.

      However, discouraging flying hits the wrong problem, we need to discourage burning fossil fuels. Anything approximating that might be helping, but it might not. We need a laser focus on the real issue.

      • C says:
        25 Mar25 March 00:26

        Are the points a taxable benefit, or a rebate? For points earned on businesss travel [paid by an employer] one could argue a benefit. However, for personal travel, or card spend, they’re effectively the same as cash back, so a rebate. Administering a tax on only the benefit component would be far more complicated than the revenue raise. It could also deter more taxable activity than the tax raised on tickets paid for with those same points (and thus might actually be revenue negative).

  • Muzer says:
    24 Mar24 March 10:05

    Frankly reducing domestic APD while rail fares are still going up is utterly ludicrous and I will oppose all such moves.

    • Matarredonda says:
      24 Mar24 March 11:15

      Rail fares only going up because Government want increased revenue with no thoughts of the environmental aspects.
      No thought out policy if how best to allign all modes of transport ranging from bycyle to planes and everything in between for economy c and environmental benefit.

  • kitten says:
    24 Mar24 March 10:42

    Those alternatives – even just that thet were mooted – show the incompetence of whoever the government brought into this.

    Sheer, sheer incompetence.

    • yorkieflyer says:
      24 Mar24 March 11:38

      It’s not so much incompetence as much as those who propose and then the decision makers have very little if any working knowledge of the sectors for which they are suggesting policies. Heaven forbid they actually asked industry.
      Just waiting for whatever nonsense emerges from the Global Travel Taskforce, which is another case in point.

    • Callum says:
      24 Mar24 March 12:47

      That’s the entire point of a review… It’s not as stupid as Rob claimed anyway. He pointed out that domestic APD is unfair because it’s charged both ways, that suggestion is the only one that actually addresses that point.

      The (I agree – far more logical) alternative of halving it makes one way flights cheaper too.

      • Rob says:
        24 Mar24 March 12:56

        It IS stupid. It weakens the entire consultation because people now have to waste time giving an opinion on this option rather than just nodding through the 50% discount.

        Of course, it could be a cunning plan. If you give people two options it makes them think that these are the only choices, whereas there is also a 3rd option which is scrapping it entirely.

        • Chrisasaurus says:
          24 Mar24 March 14:35

          Takes even longer to deal with objections afterwards because someone claims the stupid option wasn’t even considered…

  • Simon Cross says:
    24 Mar24 March 14:03

    This is madness both economically and environmentally.

    Domestic aviation (especially between major cities) has a much more environmentally effective alternative (namely trains which currently and post pandemic are likely to have significant spare capacity) and if anything the Government should be encouraging a reduction in such domestic aviation services for the sake of the environment. Reducing domestic aviation services (except for hard to reach places such as islands) would have many advantages:

    • Reduced CO2 emissions
    • Reduced aircraft movements (and potentially a reduced need for airport expansion)
    • No need to raise long haul APD which will only make the UK less economically competitive and less attractive as an aviation hub in the post Brexit world.
    • Encourage increased train travel (better for the environment) and less need for Government rail subsidies in a post covid and less train travel world.
    • Positive leadership in Global environmental issues / climate change in the year we are Chairing COP 21 (This seems like yet another “shoot ourselves in the foot move like the Cumbrian Coal Mine)

    Personally I would be increasing UK APD (except to islands) and using the revenue raised to further develop our train services and reduce long haul APD to help maintain the UK as a major aviation hub in the post Brexit world.

  • Doug M says:
    24 Mar24 March 14:16

    Why don’t extra legroom seats (as a product) like VS Delight, have to pay higher ADP?

    • Rhys says:
      24 Mar24 March 14:26

      Because it’s still economy. Same cabin vs Premium, which is a separate cabin.

      • Doug M says:
        24 Mar24 March 15:48

        Cheers. Seems a little random to me where the lines are drawn. The 40″ seat pitch obviously protects against all business products like the previous BA1 to BA4 flights. The separation of various economy products against Premium seems much more vague. Assuming WT+ is sub 40″ pitch, then removing the bulkhead/curtain and calling it Economy Bliss (extra legroom and width) then qualifies for lower APD?

        • Rhys says:
          24 Mar24 March 16:02

          Yes, but for many part of the appeal of Premium Economy is that it is a separate cabin from the riff raff!

  • Dubious says:
    24 Mar24 March 15:03

    Both proposals seem to be very aviation-limited viewpoints – nothing like more integrated transportation.

    I personally feel the issue shouldn’t be an argument comparing trains versus flights. The real issue is transportation by car. As pointed out by others this is actually some of the cheaper ways of moving oneself around, and yet it is also one of the most polluting on a per person basis. I’d far rather see a Dash-8 aircraft with 40 people on it than 40 separate cars all driving across the UK.

    • Joe says:
      24 Mar24 March 16:06

      Agreed. But aviation is an easy target. Big nasty fuel guzzling planes – whereas there are other sectors with worst (and more easily fixed) carbon emissions.

    • Andrew says:
      24 Mar24 March 20:42

      An electric car is the cheapest and least polluting way to get about the country.

      With the 0% BIK, a higher rate tax payer can lease a £65,000 Electric Audi Etron from as little as £330 a month including servicing and insurance. There’s no road fund duty to pay.

      People can charge it for free using their domestic solar panels, or with Octopus energy, on some nights they pay drivers to charge their cars.

      It’s completely baffling the eco-crowd. They’ve spent the best part of their lives changing “car bad”, and now a car that can do 0-60 in 4 seconds is as clean as a bicycle.

      • TGLoyalty says:
        24 Mar24 March 22:37

        Clean at tailpipe.

        Consider the pollution of the manufacturing process, batteries are very dirty to produce, and the pollution from your energy source, you can choose 100% green at home these days but not aware of any green charger networks, Interested to know if there are any?

      • Ben says:
        25 Mar25 March 12:08

        @Andrew sadly not. Cars, vans and lorries are still responsible for particles scrubbed off tyres, brake pads and the roads themselves. These pollutants are known as Non-Exhaust Emissions (NEE’s) and are apparently now a bigger source of air pollution than exhaust emissions for the newest fossil-fuel cars. Us “eco-crowd” are sticking with trains and bicycles!

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