Air Passenger Duty tipped be hiked in Budget

Air Passenger Duty appears set to rise above the rate of inflation in next week’s Budget as the chancellor looks to plug a hole in the government finances.

A senior aviation source told Travel Weekly: “The chancellor will probably increase APD above inflation as the government has a £40 billion black hole to fill.”

Deloitte UK chief economist Ian Stewart said: “It’s not a question of whether taxes will rise, but by how much.”

The Daily Mail reported “Labour plots a tax raid on your holidays” at the weekend, suggesting the chancellor plans “inflation-busting hikes” in APD. It reported Treasury officials had demanded Department for Transport data on the industry to assess the impact.

Chancellor Rachel Reeves is expected to take a series of tax-raising measures, predominantly aimed at business and those better off – including an increase in employers’ national insurance contributions, a rise in capital gains tax on the sale of assets, reductions in tax relief and an extension of the freeze on income tax thresholds.

Abta director of public affairs Luke Petherbridge confirmed: “It seems likely APD will increase in next week’s Budget.”

But he said: “We highlighted that the UK charges among the highest rates of aviation taxes in the world in our Budget submission to the Treasury. It would be a mistake to significantly hike the cost of hard‑earned holidays.

“APD is not the only tax on our sector. There is a layering of taxes and charges on aviation.

“This could increase the cost of flying to the extent that demand is unduly suppressed.”

Abta’s latest Holiday Habits survey – released this month – found almost two-thirds (65%) of respondents thought UK travellers should not pay APD rates higher than elsewhere in Europe.

The Office for Budget Responsibility (OBR) estimates APD will raise £4.5 billion in the 12 months to April 2025, equating to 0.4% of government tax receipts.

The OBR notes more than 90% of flights are in a class “liable to the reduced rate”.