Millions of families face a tax raid on their holidays as part of Rachel Reeves‘s Budget cash grab.
As it emerged yesterday that the Chancellor is planning to freeze income tax thresholds for longer, inflation-busting hikes in Air Passenger Duty – a stealth levy on air fares known as the ‘holiday tax’ – are also set to be announced in the upcoming measures.
Treasury officials have demanded economic performance data from the Department for Transport about the travel industry, assessing the impact of increasing APD and whether the industry can shoulder such rises.
Above-inflation hikes will see ticket prices go up and could collectively increase the cost of holidays for travellers by hundreds of millions of pounds, all of which would go into Treasury coffers.
The industry is braced for the levy to be increased with Ryanair boss Michael O’Leary this week threatening to axe hundreds of UK flights in response.
Inflation-busting hikes in Air Passenger Duty – a stealth levy on air fares known as the ‘holiday tax’ – are set to be announced in the upcoming measures (file pic)
Reeves’ above-inflation hikes will see ticket prices go up and could collectively increase the cost of holidays for travellers by hundreds of millions of pounds, all of which would go into Treasury coffers
He said: ‘If they raise APD again on domestic flights then there will be a cut in capacity, no question.
‘These routes are not particularly profitable, they barely break even. APD is a penal tax on the poor. The rich don’t care.
‘In a post-Brexit environment, the UK needs to stimulate inward tourism.’
It came as:
It comes amid fears that Labour is also set to hit millions of drivers with a multi-billion pound fuel duty raid, adding 7p a litre at the pumps.
Helen Whately, transport spokesman for the Conservatives, said: ‘Any tax hike – including on family holidays – will be a political choice made by the Labour Government.
‘Labour told the British people, over 50 times during the election, they would not raise their taxes which they will rightly be held to account on.’
An aviation industry source said: ‘We’re expecting an above-RPI increase given everything we’re hearing about tax rises in the Budget.’
Asked if the Chancellor was planning to raise the levy by more than the RPI rate of inflation in the October 30 Budget, a Treasury spokesman simply said that ‘difficult decisions lie ahead’.
The APD regime was overhauled in April last year, replacing the former two-band system with a three-tier scheme based on the distance being flown and amount of carbon emitted.
The levy is charged on flights taking off from a UK airport, meaning it is paid on outbound journeys but not inbound. The tax is usually passed on to customers by carriers, meaning air fares increase when it is hiked (file pic)
Those flying abroad up to 2,000 miles pay £13 in economy or £26 in business class.
For journeys up to 5,500 miles the charges are £88 and £194 respectively and for long-haul the levy is £92 and £202.
The levy is charged on flights taking off from a UK airport, meaning it is paid on outbound journeys but not inbound.
The tax is usually passed on to customers by carriers, meaning air fares increase when it is hiked.
A Treasury spokesman said: ‘The Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22billion hole the Government has inherited.’