Tax by tax, spend by spend

Air passenger duty

This Forecast in-depth page has been updated with information available at the time of the March 2024 Economic and fiscal outlook. We are aware of a technical issue with our tableau charts across the site. Access the data from our March 2024 forecast supporting spreadsheets directly.

Air passenger duty (APD) is a duty chargeable per passenger flying from UK airports to domestic and international destinations. APD follows a band structure, where duty rates vary by destination and by class of travel. Receipts are payable to HMRC by the operator of the aircraft 29 days (usually one calendar month) after the end of the accounting period, so, for example, May receipts will relate to flights taken in April. The Government updates the rates annually. They come into effect on 1 April each year.

From 1 April 2023, the Government is introducing a domestic band for flights within the UK and an ultra-long-haul band for flights over 5,500 miles.

APD rates from 1 April 2024

WordPress Data Table

In 2024-25 we estimate that APD will raise £4.5 billion. That represents 0.4 per cent of all receipts and is equivalent to around £150 per household and 0.2 per cent of national income. Despite the higher rates charged for travel in classes above the lowest one available, the majority of receipts are generated from those travelling in the lowest class. This reflects the fact that over 90 per cent of flights taken each year involve travel in a class that is liable to the reduced rate.

The Scotland Act 2016 includes provisions for the devolution of APD to Scotland. The timing of devolution has yet to be agreed between the Treasury and the Scottish Government. For more information on Scottish APD see our Devolved tax and spending forecasts publication.

  Forecast methodology

Forecast process

The OBR commissions forecasts of APD receipts from HM Revenue and Customs for each fiscal event. The forecasts start by generating an in-year estimate for receipts in the current year, then use a model to forecast growth in receipts from that starting point. We provide HMRC with economic forecasts that are used to generate the tax forecasts. These are scrutinised in a challenge process that typically involves two rounds of meetings where HMRC analysts present forecasts to the Budget Responsibility Committee and OBR staff. This process allows the BRC to refine the assumptions and judgements that underpin the forecasts before they are published in our Economic and fiscal outlooks (EFOs).

Forecasting model

APD receipts are estimated by multiplying the number of passengers in each band by the corresponding duty rate.

The number of air passengers in each destination band is forecast using an econometric model based on past trends and the relationship with real GDP growth.

The model follows the Government’s default indexation assumption that duty rates in the future (beyond those already specified) will increase each financial year in line with our RPI inflation forecast, with the resulting rates then rounded to the nearest £1.

Main forecast determinants

The main determinants of our APD forecast are those related to the tax base and those that are used by the Government in setting parameters of the tax system. These are:

Main forecast judgements

The most important judgements in our APD forecast are related to the economy forecast that underpins it – the most important being real GDP growth, which is used to proxy growth in demand for air travel. Alongside those, we need to make a number of other forecast judgements. These include:

    • In-year estimate – our estimate for APD receipts in the current year is determined by performance of receipts year-to-date, developments in determinants of the tax base and any other indications from HMRC’s receipts monitoring. The in-year estimate determines the base year from which we use our model to forecast receipts growth.
    • The relationship between economic activity and air travel – the extent to which air travel is affected by changes in household income and business activity (which are proxied by real GDP) is an important assumption in the forecast. We estimate these relationships based on historical data.

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  Previous forecasts

Between 2010 and 2013, our forecasts tended to be revised down, mainly due to policy changes. In 2013, we introduced a new forecast model, which links the growth in passenger numbers to our forecast for real GDP growth. Since 2014, our forecasts have been subject to smaller revisions, partly reflecting fewer changes to the tax regime. In 2023 we updated the model assumptions using more recent data.

The coronavirus outbreak and the public health measures taken to contain it led to a significant decline in economic activity and air travel. However, passenger numbers and receipts have since recovered faster than expected, leading to upward revisions in more recent forecasts.

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  Policy measures

Since our first forecast in June 2010, governments have announced a number of policy measures affecting our forecast for APD. The original costings for these measures are contained in our policy measures database and were described briefly in the Treasury’s relevant Policy costings document. For measures announced since December 2014, the uncertainty ranking that we assigned to each is set out in a separate database. For those deemed ‘high’ or ‘very high’ uncertainty, the rationale for that ranking was set out in Chapter 3 (previously Annex A) of the relevant EFO.

APD is set to be devolved to the Scottish Parliament and replaced with an ‘air departure tax’ in Scotland, but the precise timing of devolution is uncertain. For more information see our webpages on fiscal devolution.

Key APD policy changes since 2010 have included:

  • In Autumn Statement 2011, all direct flights from Northern Ireland to long haul destinations were charged at the Band A rate of tax, reducing receipts by less than £10 million over the forecast period. In January 2013, the rate for direct long-haul flights was devolved and set to zero by the Northern Ireland Executive.
  • In Autumn Statement 2011, new premium rates of APD (then set at twice the standard rate in each distance band) were introduced for all flights making use of aircraft with a weight over 20 tonnes and fewer than 19 seats. The measure was expected to increase receipts by less than £10 million a year over the forecast period.
  • In Budget 2014, the number of APD bands was reduced from four to two, with the existing bands C and D abolished with effect from 1 April 2015. The new band B covers all passengers with a final destination of more than 2,000 miles from London and was charged at the existing band B rate in 2015-16. This measure reduced receipts by around £0.2 billion a year from 2015-16 onwards.
  • In Autumn Statement 2014, the APD exemption for children under 2 years of age was extended to all children under 12 years of age (for those travelling in the lowest class of seat, typically economy class), with effect from 1 May 2015. Children under 16 years of age were exempted from 1 March 2016. This measure reduced receipts by less than £0.1 billion a year from 2016-17 onwards.
  • In Autumn Budget 2017, the reduced Band B rate was frozen for 2019-20 at £78. The ratio was also increased between the reduced and standard rates across bands from 1:2 to 1:2.2, as was the ratio between the reduced and premium rates across bands from 1:6 to 1:6.6. This measure increased receipts by between £25 and £30 million a year from 2019-20 onwards.
  • In Autumn Budget 2021, a new reduced domestic band and a new ultra-long-haul band were introduced, the latter being a partial reversal of the Budget 2014 measures.
  • In Spring Budget 2024, the 2025-26 the duty rates for standard and higher rated passengers were increased by more than RPI to adjust for recently high inflation. The duty rates for reduced rated passengers will continue to be uprated in line with RPI.

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  Ready reckoners

‘Ready reckoners’ show how our fiscal forecasts could be affected by changes in selected economic determinants. They are stylised quantifications that reflect the typical impact of changes in economic variables on receipts and spending. These estimates are specific to our March 2023 forecast and we would expect them to become outdated over time, as the economy and public finances, and the policy setting, continue to evolve. They are subject to uncertainty because they are based on models that draw on historical relationships or simulations of policy settings. More information can be found in the ‘Tax and spending ready reckoners’ spreadsheet we published on the data section of our website.

The table below shows that:

      • higher RPI inflation would increase air passenger duty receipts (applying the default indexation policy set out by the Government, we assume that duty rates are indexed in line with RPI), and
      • higher real GDP would increase air passenger duty receipts through higher passenger numbers.
WordPress Data Table

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