Air Passenger Duty may go up in Reeves’ budget – could the ‘Inverness Immunity’ come to an end?

A week from now, the chancellor will be rehearsing for her first budget. With rises in the most significant taxes – such as income tax and VAT – ruled out, Air Passenger Duty (APD) looks ripe for an increase.

This tax on flying applies to travellers flying from most UK airports. The rate depends on two things:

Age is a factor: for basic economy, under-16s avoid tax, but in premium classes only the under-twos go free.

APD currently ranges from £7 for a domestic flight in economy class to £202 in a premium cabin to a far-flung destination in Asia, Australasia or Latin America. Private jets are much more heavily taxed.

The majority of travellers pay £13 for a hop to Europe or North Africa.

The last Conservative budget set rates for April 2025 to increase by £2 for intercontinental economy passenger as well as premium travellers within Europe. Sharper rises will apply for long-haul premium passengers, taking the top rate to £224. A family of four travelling to Bangkok, Hong Kong or Singapore from 1 April next year will pay almost £900 to the government for the right to leave the country – or possibly more, if Rachel Reeves decides to target the traveller.

The Office for Budget Responsibility says: “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.”

Extracting, say, an additional £1.5bn from passengers must be tempting for the Treasury. Air Passenger Duty has been popular with every chancellor since it was invented three decades ago by the Conservative, Ken Clarke, for three good reasons.

Yet any tax increase has consequences. It’s not necessarily a good idea to tax the traveller until – in the words of earlier Labour chancellor Denis Healey – the pips squeak. In a…