Government pushes businesses to go greener as taxes are raised for gas bills – but frozen for electricity rates
- Chancellor announced in the Budget that gas levies will rise
- Changes will come into effect in April 2022
- Electricity is better for the environment than gas – but is currently taxed more
Businesses in Britain will soon have to pay more for their gas usage after the Chancellor announced he was raising the Climate Change Levy in the Budget.
Rishi Sunak said the Government will be increasing the taxes on pollution in a bid to cut down on harmful emissions and encourage energy efficiency.
Currently, electricity – which is a cleaner form of energy than gas – is taxed at a higher rate for businesses, than gas is.
Sunak revealed he will equalise the rates in April 2022 with the levy on gas being raised. However, the current tax on electricity will remain frozen.
The Government is set to freeze the levy businesses have to pay on electricity – but raise on gas
He said: ‘Electricity is now a cleaner energy form than gas, but our climate change levy – paid by companies – taxes electricity at a higher rate.
‘As another step towards equalising the rates and encouraging energy efficiency, from April 2022 I’m freezing the levy on electricity and raising it on gas.’
The Climate Change Levy was introduced in April 2001 as a tax on energy delivered to non-domestic users in the United Kingdom.
At present, natural gas is charged at 0.339p per kilowatt hour of usage while electricity is at 0.847p – more than twice as much, despite being better for the environment thanks to the increase in wind and solar-generated power.
Businesses have their Levy calculated by their energy supplier who will add it directly to their bill.
The supplier then passes it onto HM Revenue & Customs and businesses will see the charge listed as a separate line item on their energy bill.
Domestic households will not pay this tax, nor will businesses that use small amounts of energy or charities engaged in non-commercial activities.
However, the rates also do not apply if the electricity, gas or solid fuel is not set to be used in the UK or if the electricity was generated from renewable sources before 1 August 2015, among other conditions.
It’ll rake in £600million between 2022 and 2025 with the higher levy.
The Chancellor also confirmed, as part of the Government’s plan to make Britain greener, that it would be reopening and extending the Climate Change Agreement scheme.
This scheme allows businesses to reduce their Climate Change Levy bill in exchange for meeting targets to improve their energy efficiency.
The terms of the extended scheme will be set out in a consultation to be launched shortly after Budget.
As part of this, the government will simultaneously consult on long-term options for the CCA scheme.
It is also introducing a Green Gas Levy which aims to replace natural gas and other fossil fuels with low carbon alternatives – likely to be primarily a mix of green gas, heat pumps and heat networks.