The Chancellor delivered his Budget Statement today, Wednesday 28th October 2026.
The below provides a high-level summary of the implications following the Chancellor’s announcements, with particular focus on those with energy business interests.
Oil & Gas Revenue Levy (OGRL)
As anticipated, the OGRL is to be included within the Finance Bill 2026/2027. The OGRL will take effect immediately after the date on which the EPL ends, which is scheduled to be 1 April 2030 or earlier if the price floor is triggered under the Energy Security Investment Mechanism (ESIM). The ESIM provides for the EPL to end early if both oil and gas prices fall to or below specified thresholds over a six-month reference period.
Tax rates
No changes to the rates of ring fence corporation tax (RFCT), supplementary charge (SC) or the energy profits levy (EPL).
For corporation tax on profits out with the UK’s oil and gas ring fence regime, the full rate of corporation tax (CT) remains at 25%. No change to the 19% CT rate on profits up to £50,000.
Capital allowances/tax depreciation
No changes announced in respect of the availability of capital allowances in respect of those with ring fence trades, generally 100% first year allowances (or 25% writing down allowance) are available.
For those with non-ring fence trades, the first-year allowance has been increased from 40% to 50% with effect from 1 April 2027. The full expensing regime remains in place as before. The general capital allowance writing down has reduced from 14% (applicable from 1 April 2026) to 12% (applicable from 1 April 2027).
The special rate writing down allowance remains at 6%.
Other relevant announcements
Following the 2026 consultation regarding the tax treatment of pre-development costs, the government will publish a summary of responses to the call for evidence. Government is exploring the making of potential changes to its guidance in order to clarify the tax treatment and consider further the wider challenges that have been raised by some of the respondents to the consultation.
The government is also publishing a Call for Evidence on the future administration of corporation tax, seeking views on how a modernised corporation tax administration system could better support companies to report and pay the right amount of tax first time.
Comments:
Today’s budget announcement does not contain any new industry specific measures for the oil and gas sector, nor does it really have any surprises. This is consistent with the approach adopted generally. Ideally there would have been the announcement of an accelerated timeline for replacing the EPL but given the continued high oil price and the expected EPL tax take, government may have felt it would be difficult to justify such an announcement at this time. As it stands, 31 March 2030 remains its abolition date. It is positive that the commitment to legislate for the OGRL was reaffirmed; however, this should be expected on the basis that significant work has been undertaken by both HMRC and the industry on this over the last several months. It is hoped that the recent approval of Jackdaw and the new powers vested in NTSA to approve developments may stimulate activity in the North Sea. This would provide an appropriate background to look at an early end to the EPL.
Should you require any further advice in respect of the 2026 Budget, please get in touch.