The United Kingdom’s Autumn Budget delivered by Chancellor Rachel Reeves on 30th October 2024 contained the widely anticipated rise in Air Passenger Duty (APD) but also a less widely expected headline increase in APD of a further 50% on private aircraft.
The Budget also raised the prospect of reform of the definition of “private jets” for this purpose as the Government launched a consultation on further reforms that are likely to have a profound impact on private aviation. This article considers the impact of the UK Autumn Budget in the context of the trend across Europe (notably recently in France) for increased taxes on aviation, and private aviation in particular, and the drive for sustainability in aviation.
Air Passenger Duty increase
UK APD raised £3.8 billion in 2023/24 from the Government’s own figures, and is a tax that is justified by the Government on the “polluter pays” principle. It is paid for by airlines and operators on all flights departing UK airports on fixed wing aircraft with a maximum take off weight (MTOW) of 5.7 tonnes and over. The tax was introduced in 1994 and applied to private jets from 2013.
For 2026-27, the government announced in the Autumn Budget that it will increase rates of Air Passenger Duty (APD). This equates to £1 more for those taking domestic flights in economy class, £2 more for those flying to short-haul destinations in economy class, £12 for long-haul destinations, and relatively more for premium economy and business class passengers.
In addition, the “higher rate”, which currently applies to larger private jets, will rise in the next few years. At present, the higher rate applies to private jets with a MTOW of 20 tonnes or more that are equipped to seat fewer than 19 passengers.
From 1 April 2026, the higher APD rates will be:
Domestic: £142
Band A (0 to 2,000 miles): £142
Band B (2,001 to 5,500 miles): £1,097
Band C (over 5,500 miles): £1,141
APD is a tax chargeable by reference to each passenger and not by reference to the aircraft (although if the passengers are on an aircraft that is less than 5.7 tonnes or not fuelled by kerosene, there is no tax). This of course means that airlines pay much more APD on a full flight than a relatively empty one.
The British Business General Aviation Association (BBGA) has raised concerns about the effect of the increase on the business aviation industry, which it estimates would add over £1,000 per passenger on charter rates for business jets passengers over 2,000 miles. At present, given the MTOW limit, the impact does depend on what type of flying a charter broker is arranging or an operator is flying. For example, by contrast to the dismay in most of the sector, Toby Edwards, CEO of Victor, an on demand private jet company, stressed that 78% of Victor’s private jet charter bookings departing the UK are below 2,000 miles (i.e. within Europe), of which fewer than 1% are on aircraft weighing over 20 tonnes (to which the higher rate is applicable). Victor therefore believes that the impact of the APD on their end customers will be “negligible”. However, as mentioned, the direction of travel may be thought to be clear and it seems highly likely that the end result of the consultation will be to bring smaller private aircraft into the net of APD.
The connected flights rule
There are exemptions which apply to APD. The most important APD exemption is the connected flights rule – without which airlines would be deterred from using Heathrow to stop over. The rule exempts a flight departing from the UK but connected with a previous flight that did not depart from the UK.
For example, it would be relevant to a passenger on a Virgin flight starting in Dubai, stopping in London for 3-4 hours and then flying on to New York. As with the charge to APD itself, the connected flights rule is applied by reference to the individual passenger and not the aircraft. In this case, APD would not apply to passengers who boarded in Dubai but does apply to passengers who were only taken on in London.
Therefore, if a private jet arrives in the UK with 5 passengers on it in order to pick up one extra passenger and then leaves, is there a charge for 6 passengers? Applying the above principles there would not be APD on the five passengers (provided they meet the conditions for the connected flights rule to apply), but there would be APD for the new passenger.
If a private jet leaves the UK and flies to Guernsey, touches down, then leaves for the USA, is it charged just for the flight to Guernsey rather than the USA, thus avoiding the long-haul charge? There is a cost to landing (e.g. fuel burn / landing fee) but for a large number of passengers that may outweigh the APD. However, the connected flights rule cuts both ways. Unless the conditions of the connected flights rule are not met, the passengers in this case would be treated as flying from the UK to the USA. That means APD could apply despite the jet touching down in Guernsey.
Consultation on APD reform for Private Jets launched
There has been criticism of the increase in APD from airlines including Michael O’Leary of Ryanair, who points to trends in some EU states to keep APD lower and cites the reduction in proposed flights that the low cost carrier says it will be instigating as a result of the policy, but while the airline industry appears in the main confident the changes in the Budget would be manageable there is concern in the business jets sector in respect of the consultation launched on 30th October about changing the way air passenger duty is calculated for private jets.
The Government is consulting on extending the scope of the higher rate of APD to cover all passengers on private jets above the 5.7 tonne threshold for APD. As mentioned above the higher rate currently only applies to larger, more luxurious private jets reflecting the higher class of service provided, for example the Global 7500 and the G700 would be caught by the higher rate at current levels. The Government is minded to standardise the tax treatment of lighter and heavier private jets and seeks evidence and representations from industry with the consultation open until 22nd January 2025. As part of the proposals, private jets would be defined on the basis of ticketing arrangements and absence of published scheduling information as well as agreements for carriage. This could get more complicated, as any test based on the purpose of the flight has many different types of operation to consider, such as private flying for a High Net Worth Individual (HNWI) who owns the aircraft, executives flying on a corporate aircraft, fractional ownership, day leasing, one trip charter, block charter, etc.
Any widening of the definition could potentially bring increased cost challenges to smaller operators in the charter market. The BBGA will be making the case that the UK Government’s mission to kick start economic growth will be aided by business aviation, with the sector leading on innovation from electric aviation to early adoption and promotion of Sustainable Aviation Fuel and hydrogen, as well as operational expertise.
The French Connection
It is interesting to note that proposals to increase the tax burden on aviation go further in France, evidencing a trend to tax private aviation more heavily across Europe. It is widely expected that the French government will significantly increase taxes on air passengers as part of a general package of new taxes aimed at closing France’s budget deficit.
The French government is reportedly considering taxes of up to 3,000 Euros per passenger on private jet flights. The International Air Transport Association and The European Business Aviation Association have both warned the French government that tax rises on air transport would be disastrous for the French economy.
Are higher taxes the answer?
Arguments are being made that countries with higher aviation taxes have recovered slowest from the pandemic shutdown. Increases in aviation taxes may further damage a country’s recovery and the ability of aviation to drive wider economic benefits and tax revenues.
It is often difficult to disentangle whether APD is part of the push to ensure that aviation pays its share for the environmental impact it causes (alongside other measures such as the EU ETS[1]), or if it simply is (or has become) a tax raising measure.
In respect of the former, the aviation industry is committed to the Net Zero Targets and significant progress is being made towards reducing emissions and sustainability in a “hard to abate” industry. Private aviation certainly has a role to play here, and many would argue that it is playing its part. It remains to be seen to what extent the UK Government can achieve its stated objective for a “fair contribution to the public finances” (in the words of the consultation) and a healthy and sustainable aviation industry without risking the UK’s international competitiveness, investment by HNWIs in the UK, and avoiding economic damage to the private jet industry and the taxpayers that it employs.
[1] The EU Emissions Trading Scheme, a carbon market requiring polluters to pay for their greenhouse gas emissions to bring overall EU emissions down while generating revenues to finance the green transition.
