In its latest spring budget, the United Kingdom government revealed plans to increase the Air Passenger Duty (APD) for premium cabin passengers.
The APD, a tax on passengers leaving U.K. airports, will increase for all fare types in line with the inflationary Retail Price Index.
However, non-economy tickets will face additional hikes.
Impact on premium cabin passengers
The APD applies to all passengers aged 16 and above departing from U.K. airports.
Airlines incorporate the tax into ticket prices and subsequently remit it to the government. The fee varies depending on flight distance and class of service.
The new tax adjustments will affect premium economy, business class, first-class tickets, and private jet passengers departing from the U.K.
Notably, domestic flights will remain unaffected.
Notable percentage hike for 2025-26 financial year
According to the Treasury, premium-cabin passengers on short-haul flights can expect the APD for the 2025-26 financial year to be £16 (~$20).
The APD for long-haul flights is expected to amount to £224 (~$286).
This represents a 12% rise for long-haul flights and a 23% increase for short-haul flights in premium cabins.
The elevated taxes will come into effect from April 2025.
Presently, the APD for premium cabins stands at £13 for short-haul flights and £200 for long-haul flights.
These amounts were set to rise in the 2024-25 financial year to £14 for short-haul flights and £202 for long-haul flights.
The Treasury explained that APD rates for economy passengers in 2025-26 will rise in line with the forecast Retail Price Index, rounded to the nearest pound.
Additionally, rates for premium economy, business, first-class passengers, and private jet travelers will climb in tandem with forecast RPI.
They will also be further adjusted for recent high inflation to maintain their real-term value.
Financial implications and industry response
The Treasury anticipates the new APD to generate an additional £110 million between 2025 and 2026.
It also expects a further £10 million annually through 2028-29.
Tim Alderslade, CEO of Airlines U.K., voiced concern that the APD increase clashes with the Prime Minister’s commitment against discouraging flying through taxation.
He believes imposing stealthy tax rises on passengers, including families and leisure travelers, will damage the U.K.’s global competitiveness.
Implications on holiday budget and travels abroad
It’s important to note that these fees only affect outbound flights from the U.K, making the fee increase a blow to frequent travelers, especially since Brits love to go on holidays.
According to a chart released by data website Statista last year, the U.S. was the sixth most visited destination by U.K. citizens.
As residents of a Visa Waiver Program (VWP) country, British nationals traveling to the U.S. must obtain an ESTA, which is another financial consideration for travelers.
The Electronic System for Travel Authorization (ESTA) allows eligible travelers to visit the U.S. for stays of up to 90 days without requiring a visa.