Heathrow hits out after budget raises taxes on all UK outbound flights

Air passenger duty will rise in line with RPI rate of inflation in 2025/26

Virgin Atlantic said air passenger duty on its flights is increasing from £194 to £216, and the rise will be passed on to customers. Getty Images
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Passengers flying out of the UK face higher ticket prices due to changes to flight duty announced in the budget, prompting Heathrow to criticise the failure to boost the airline industry.

Chancellor Jeremy Hunt announced a “one-off adjustment” in rates of air passenger duty (APD) for premium economy, business class and first class tickets, saying the measure will “account for high inflation in recent years”.

However, the Treasury also plans to raise APD in line with the Retail Prices Index measure of inflation for all outbound UK flights from the 2025/26 financial year – which will affect even the cheapest economy class tickets.

The so-called “stealth tax” is expected to generate £110 million in revenue in the first 12 months.

Separately, the budget did not include the return of VAT-free shopping for tourists – something Heathrow, Europe’s busiest airport, and many other retailers have campaigned for.

Heathrow’s Chief of Staff and Carbon, Nigel Milton, told The National the budget represented a “missed opportunity”.

The airport recently announced it is back in the black for the first time since before the Covid pandemic ravaged global air travel, making £38 million in pre-tax profits last year.

Instead of firing up the engines so British businesses can compete internationally, we risk falling behind as our competitors race ahead,” said Mr Milton.

He added: “The UK needs to lead the way on becoming producers and exporters of sustainable aviation fuel, encourage travellers to the UK with tax-free shopping and prioritise an economic regulation system that promotes inward investment.

“Instead, the government chooses to raise taxes on aviation, with no ring-fencing of funds to support aviation’s green transition. We understand the tough backdrop the Chancellor faces but it’s frustrating to see short-sighted decisions being prioritised over policies that would deliver the growth and jobs the economy needs.”

Clive Wratten, chief executive of the Business Travel Association industry body, called the hike “just another tax on British businesses”.

Tim Alderslade, chief executive of Airlines UK, the industry body representing UK-registered carriers, said: “The decision to increase APD goes against the Prime Minister's commitment not to discourage flying through taxation.

“Hitting passengers – including families and those travelling for leisure – with stealthy tax rises will only make the UK even less competitive on the global stage.”

He added: “The UK's aviation taxes and airport charges are already among the highest in the world.”

The UK budget - in pictures

Airlines have also expressed their disappointment at the rise in charges.

A representative for Virgin Atlantic told The National the government has failed to acknowledge that by further increasing APD it is penalising “hardworking Brits”.

The airline said the APD paid on Virgin Atlantic flights is increasing from £194 to £216, representing a 12 per cent rise, which will pass straight to customers.

The Virgin representative added: “An increase to the standard rate of APD undermines the competitiveness of the UK economy, discouraging leisure travellers who have been crucial in aiding the industry’s recovery.”

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Updated: March 07, 2024, 1:51 PM