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In a week's time the chancellor will repeat her first budget. As increases in the most important taxes – such as income tax and VAT – are excluded, Air Passenger Rights (APD) seems ripe for a raise.
This flight tax applies to travelers arriving from most UK airports. The price depends on two things:
- the class you are traveling in – cheap seats or something more comfortable
- the final destination of your ticket, typically UK, Europe/North Africa, long-haul and ultra-long-haul
Age is a factor: in basic economy, those under 16 escape tax, but in premium classes, only those under two are free.
APD currently ranges from £7 for a domestic economy flight to £202 in a premium cabin to a far-flung destination in Asia, Australasia or Latin America. Private jets are much more heavily taxed.
The majority of travelers pay £13 for a journey to Europe or North Africa.
The latest Conservative Budget set fares for April 2025 at a £2 increase for intercontinental economy passengers as well as premium travelers within Europe. Bigger rises will apply to long-haul premium passengers, taking the highest fare to £224. A family of four traveling to Bangkok, Hong Kong or Singapore from April 1 next year will pay almost £900 to the government for the right to leave the country – or possibly more if Rachel Reeves decides to target the traveler.
The Office for Budget Responsibility says: “In 2024-25, we estimate that ODA will raise £4.5 billion. This represents 0.4 per cent of all receipts and equates to around £150 per household and 0.2 per cent of national income.
Extracting, say, an extra £1.5 billion from passengers must be tempting for the Treasury. Air passenger law has been popular with every chancellor since it was invented thirty years ago by the Conservative Ken Clarke, for three good reasons:
- It's easy to cash (airlines just send a check every month) and hard to avoid
- It's hidden in the price of plane tickets – and for business travelers working for big companies, it won't even be noticed.
- Unlike many taxes, almost half of the people who pay ODA are foreign travelers and therefore do not vote in UK elections.
However, every tax increase has consequences. It's not necessarily a good idea to tax the traveler until – in the words of former Labor chancellor Denis Healey – the glitches creak. To help Ms. Reeves and her colleagues decide their next move, I will outline the possible effects.
1. Deter incoming visitors
Foreign tourists can't vote in our elections, but they can vote with their feet – and go elsewhere if they think fares to and from the UK are too high. Inbound tourism represents a huge benefit to any nation – including tax revenue, with no VAT to be charged on hotel stays, theater visits and restaurant meals.
2. Premium economic drain
Recent ODA increases have trickled down to premium travelers – rates have risen much faster than inflation. These apply to any ticket that comes with a seat pitch (distance from the front of one seat to the front of the next) of at least 40 inches. People who currently pay £194 in tax for each member of their family for a trip to Florida have their limits on how much extra they will pay for premium economy.
A senior aviation official says: “Much of the rebound in premium cabin occupancy is actually among leisure travelers, who are spending their own money. The idea that collecting more on the backs of business travelers is a “victimless crime” because it becomes a decimal point in some banks' travel budget is simply not true. »
I sometimes pay extra for premium economy, but only on my return flight to the UK when no taxes apply. I predict that premium economy cabins could start to look emptier, with a lot of pressure as passengers return to the cheap seats.
3. More avoidance of high ODA rates
On my last two transatlantic trips, I practiced “Dublin Dodge”: buy a cheap flight to the Irish capital and book a separate ticket across the ocean, saving £75 in passenger fees each time air. Dublin Airport also has pre-clearance for US border formalities, meaning you arrive in the US as a domestic passenger, potentially saving you an hour or two of travel time. 'waiting.
For Asia, Africa and Australia, Turkish Airlines is a good bet: stay at least 24 hours in Turkey's largest city before your long-haul flight and you'll save enough taxes to pay for your hotel stopover.
The higher the ODA, the more of us will use perfectly legal tricks to avoid or reduce tax.
I can, however, propose an idea for raising taxes: removing “Inverness immunity”. Passengers traveling from airports in the Scottish Highlands and Islands region are exempt from air passenger taxes, even if they are heading first class to the ends of the earth.
Every day, some people travel to Inverness not to enjoy the many attractions of the city and region but to turn around and fly on KLM via Amsterdam or British Airways via Heathrow. Close this gap, and the environment – and the Treasury – will benefit.
