Energy profits levy reform would yield extra £15.7bn in taxes, experts say

Proposals to reform the 78% Energy Profits Levy (EPL) would yield £15.7 billion in taxes within the next decade, according to new analysis.

Offshore Energies UK (OEUK) says that reforming the EPL in 2026, rather than delaying it to 2030, will increase tax receipts from £32.9 billion to £48.6 billion.

This would be made up of £7.5 billion in payroll taxes from the jobs sustained in industry, a further £6.3 billion in extra corporation tax from oil and gas operators, £4.6 billion from the new oil and gas price mechanism along with wider tax contribution from the UK supply chain, midstream infrastructure.

OEUK says their analysis proves the tax scheme would pay for itself within the next five years.

Although there would be a short-term reduction in production tax receipts, this would be offset by sustained payroll and corporation taxes alongside wider economic gains, OEUK has said.

It added the proposed reform could unlock £50 billion of UK oil and gas projects, sustain tens of thousands of jobs, and over time deliver higher tax receipts, supporting the UK’s energy security and net zero ambitions. ​

The data seen by OEUK shows 111 projects are economically viable in the right conditions, representing 3.25 billion barrels of oil and gas reserves – meaning the UK can support around half its oil and gas needs to 2050 from domestic production that pays UK taxes and supports jobs and the supply chain.

These projects could add £75 billion of value to the UK economy by 2035. ​

OEUK warns that delaying reform until 2030 will accelerate the decline of North Sea production, with output forecast to fall by 40% by 2030 unless action is taken.

This would result in the loss of 1,000 jobs per month, increased reliance on imports, and a shrinking national tax base from domestic oil and gas production.

OEUK also points out that the Office for Budget Responsibility’s (OBR) forecasts for oil and gas tax revenues are overstated because of lower commodity prices, with expected production revenue falling from £11.5 billion to £6.7 billion between 2026/27 and 2029/30. ​

Reforming the EPL would also secure the offshore energy workforce and supply chain, and the longevity of critical infrastructure and supporting industrial hubs across the country, including Aberdeen, Teesside, Grangemouth and East Anglia. ​

David Whitehouse, chief executive of OEUK, said: “Our proposal will unlock immediate investment, secure tens of thousands of jobs, and deliver more tax, not less for essential services like schools and hospitals.​ We recognise the pressures facing the economy and our proposals shows a path to growth through making the most of homegrown energy.

“Reforming the EPL will also support the UK’s wider energy future by sustaining the supply chain and industrial capabilities needed for offshore wind, carbon storage, and hydrogen projects. ​

“The future of the North Sea is in our hands. ​Our message to government is simple: Reform the EPL in 2026 to unlock more tax not less, support more jobs not less and deliver more homegrown energy not less.”

The Treasury was approached for comment.