UK Air Passenger Duty: How Does It Actually Work?
The UK has some of the highest taxes and charges for aviation in the world. The main culprit…
The UK has some of the highest taxes and charges for aviation in the world. The main culprit of this is Air Passenger Duty (APD), adding up to £172 to a departing flight. Anyone flying to or from the UK will likely have heard of this, but how does it work? Its application is not that straightforward but worth knowing about. Understanding how it works can even help save money.
APD is an additional tax charged on UK flight departures, on top of other taxes. It applies to all flight departures from the UK (but not to arrivals). It makes taxes in the UK amongst the highest in the world. This was not always the case, though. APD was only introduced in 1993 (and charged from 1994) by the Conservative Chancellor at the time, Kenneth Clarke. This was viewed as an alternative to taxing aviation fuel, which is banned in many countries, including the EU.
Speaking to the Independent, Kenneth Clarke explained well the thinking behind its introduction. He said:
“I decided that aviation was in an unusual position in that it’s the only form of transport where no one was paying any tax on the fuel that it uses…. For me, that was an anomaly, not least because people who use aviation tend to be slightly more prosperous than those who use other forms of transport.”
Although there has been discussion about the tax helping towards emissions reduction and carbon offsetting in aviation, it is not ring-fenced for any particular use. Nor is it based on the size or efficiency of aircraft.
The APD rates today
APD rates have risen significantly since they were introduced. The initial rate in 1994 was £5 on European flights and £10 on long-haul flights. These have since increased and have also been split into higher rates for premium cabins. Prior to 2015, there were four distance bands; this is now just two.
The last major changes to the rates were in 2019. As of 2020, there are four main rates, applied by flight distance and cabin flown as follows:
|APD Band||Reduced Rate (in lowest class)||Standard Rates (in any other cabin)|
|Band A (up to 2,000 miles)||£13||£26|
|Band B (over 2,000 miles)||£78||£172|
Some important points to note about these rates include:
- The band distance is not, in fact, the length of the flight. It is the distance from London to the capital city of the destination country.
- APD does not apply to under-16s traveling in economy class (this has applied since 2016).
- For connecting flights, it is the final destination that sets the rate. It is not charged for each flight.
- Also, note that there is a planned increase in the rates on April 1st 2021. The Band A rates will remain the same, but Band B rates will increase to £82 and £180.
- There is also an additional higher ‘general aviation’ rate for aircraft over 20 tonnes carrying under 19 passengers. This is £78 and £515 for short and long-haul.
- Full details and terms of rates can be seen on the UK government’s website.
APD in Scotland and Northern Ireland
Rates differ slightly in Scotland and Northern Ireland. In particular:
- APD does not apply to flights departing from the Scottish Highlands and Islands region (including Inverness).
- For flights starting in Northern Ireland, there is no APD on a direct flight to a long-haul Band B destination. Rates still apply to Band A destinations and to flights that connect en route to a Band B destination.
Scotland has been looking at taking this further as part of devolved APD. In 2017, it proposed a lower APD from all Scottish airports, first at 50% of the UK rate, and later hopefully eliminating it. Since 2019 though, these plans have been dropped.
Who pays APD?
In theory, APD is paid by each passenger. The rate is entirely based on passenger load (unlike some other airline fees such as landing fees), and most airlines will show it separately as part of the total fare paid. Passengers, of course, consider the overall ticket fare, and as such, they may choose alternatives (such as longer connecting flights) that avoid the fee or just not fly at all.
Furthermore, some fares are set so low that the airline is effectively topping up the fare just to cover APD and other taxes. Promotion fares with low-cost airlines can be as low as £10, lower than the APD level. British Airways also offers a Reward Flight Saver product where short-haul flights paid for with Avios have a fee of just £17.50 each way (again, lower than the APD and UK taxes).
APD going forward
APD raises significant revenue for the UK government, but there is no doubt it is harmful to many airlines. It is not just costly; it also makes many UK routes less attractive for airlines. For example, Norwegian cited APD as a leading reason for dropping Edinburgh to New York flights. And APD was a major factor in the demise of UK airline Flybe.
Many airlines and industry bodies have criticized the failure to remove or lower APD during the pandemic. Even in good times, it makes it hard for airlines to compete against European options.
Going forward, there are hopes that APD will be revised. Now that the UK has left the EU, it can alter domestic and international rates, and perhaps it will do so. While many airlines are pushing for this, there is no commitment yet from the government. In fact, rates are still set to increase in 2021, not reduce.
Would you like to share any thoughts on UK APD and taxation? Is this something that should change to help the aviation sector? Let us know your thoughts in the comments.