Air Passenger Duty (APD) is under scrutiny as Chancellor Reeves considers potential increases in the upcoming budget. Could this signal the end of the so-called ‘Inverness Immunity’? The tax on flying impacts passengers departing from most UK airports and varies based on factors such as travel class and destination.
At present, APD ranges from £7 for domestic flights in economy class to £202 for premium cabins on long-haul flights to certain destinations. Private jets face even higher taxes. The last Conservative budget outlined plans for APD rates to rise in April 2025, with sharper increases for certain categories of passengers.
The Office for Budget Responsibility estimates that APD will generate £4.5 billion in 2024-25, equivalent to around £150 per household. While the tax is appealing to the Treasury due to its ease of collection and difficulty to avoid, potential increases could have repercussions.
One potential consequence of raising APD is the deterrence of inbound visitors, as higher fares may prompt tourists to choose alternative destinations. Moreover, recent increases in APD have predominantly affected premium travellers, leading to concerns about emptying premium economy cabins as passengers seek to avoid additional costs.
Passengers have been known to employ strategies to avoid or reduce high APD rates, such as booking separate tickets through airports with lower taxes. However, one suggestion for increasing revenue is to eliminate the ‘Inverness Immunity’, which exempts passengers departing from airports in the Scottish Highlands and Islands region from APD.
Closing this loophole could have environmental and financial benefits. As discussions around APD continue, stakeholders will be closely watching for any potential changes that could impact both travellers and the aviation industry.