Backpackers Tokyo

Millions of travellers are set to benefit from a cut in Air Passenger Duty (APD) from April 2023 – while some will see a small increase.

APD is unique to the UK, and a topic of much controversy. These are the key issues.

Air Passenger Duty: what is it?

APD is the tax that applies to adult (aged 16 and over) passengers boarding a flight from a UK airport. The rate of Air Passenger Duty depends on the class of travel and the destination of the flight.

For trips of up to 2,000, which covers all of Europe and parts of North Africa, the rate for economy passengers is £13. For UK domestic flights, the rate will halve to £6.50 from April 2023.

Longer-haul flights are currently subject to APD of £82 in economy, due to increase to £84 in April 2022. From 2023, trips of 2,000-5,500 miles will rise to £87, with trips over 5,500 miles subject to a slightly higher tax: £91.

In premium economy, business class and first class, rates are at least twice as high – until April 2022, £26 for short-haul and £180 for long-haul. These rates also apply to children aged two or above.

The higher rate applies if the “seat pitch” (the distance from the front of one seat to the front of the other) is over 40 inches.

Private jets pay much higher rates: £78 for short-haul, £541 for long haul.

The APD liability depends on your final destination. If you are travelling on a “through ticket,” eg Manchester-Amsterdam-Hong Kong or Birmingham-Frankfurt-Mumbai with less than 24 hours at the transit point, the long-haul rate applies.

How did it begin?

The man responsible for APD was the last Conservative chancellor of the 20th century, Kenneth Clarke. He told me: “I decided that aviation was in an unusual position in that it’s the only form of transport where no one was paying any tax on the fuel that it uses.

“For years and years governments have regarded it as totally normal to impose tax on petrol, diesel fuel and everything used by land and sea. For historic reasons nobody was placing any tax on air fares.

“For me that was an anomaly, not least because people who use aviation tend to be slightly more prosperous than those who use other forms of transport.”

As international aviation agreements generally rule out a tax on jet kerosene, Mr Clarke instead imposed Air Passenger Duty of £5 on each European flight, and £10 on long-haul services. It applied to all passengers above one year of age starting a journey at a UK airport, and took effect in 1994 – just a year before easyJet started flying.

Stelios Haji-Ioannou, founder of what has become Britain’s biggest budget airline, told me: “I’ve always been very, very upset about the way the government has decided to tax the aviation industry.”

Many other aviation figures have argued that APD is a blunt instrument that is primarily revenue-raising.

But Mr Clarke said: “If you look back at what’s happened to aviation since the time that I introduced the passenger taxes, it has gone on from strength to strength.”

At first the return leg of a UK domestic flight was exempt, but that plan fell foul of European Union competition rules. Since 2001 a return flight within Britain has incurred double APD.

What has happened since?

Mostly, it has increased – partly because Air Passenger Duty is seen as a perfect tax by politicians. APD is difficult to avoid and easy to collect, because airlines do all the work and send the Treasury a cheque. It can be presented as a “green” initiative, dampening demand for aviation. And many of the people who pay it are foreign visitors and do not vote in the UK.

The next chancellor, Gordon Brown, doubled the tax for business- and first-class seats. (One bizarre loophole, since closed, meant that passengers on the world’s most expensive aircraft, Concorde, paid the same as budget airline travellers to Morocco.)

Ahead of the 2015 election, in what was widely seen as a tax bribe, David Cameron cut the highest bands for long-haul travel, which applied disproportionately to travellers to the Caribbean and Indian sub-continent. And since 2016, APD no longer applies to under 16s travelling in basic economy (but is payable for higher classes).

How can I avoid APD?

These are some of the tax-avoiding options:

  1. Don’t fly.
  2. Be under 16 and travel in basic economy (or under two in business class).
  3. Fly into the UK on one plane and out within 24 hours on another and have them both included in the same ticket.
  4. Be a pilot or member of cabin crew on duty.
  5. Be repatriated after being refused admission to the UK.
  6. Fly on a route from a UK airport that is not subject to Air Passenger Duty.

I can’t manage 1, 2, 3, 4 or 5 right now,  but how do I find an APD-free flight?

Fly from the Scottish Highlands and Islands Region, which includes Orkney, Shetland, the Western Isles, Oban, Campbeltown and Inverness.

Remarkably, even if you are fly from Inverness to London Heathrow and onwards to a long-haul destination, the tax saving applies. Flying from Aberdeen to New York on British Airways in late November, for example, costs £392 return – but from Inverness the fare is just £316, saving one-fifth on the trip.

Long-haul flights from Belfast are also free of tax.

To be kinder to the planet, you could travel terrestrially to a foreign airport: by sea (or overland from Northern Ireland) to Dublin; by sea to the Netherlands; or on a Eurostar train to Paris, Brussels or Amsterdam.

How can I reduce APD?

You could fly to Amsterdam, Paris, Dublin or any other European airport and buy a separate ticket from there. But you will assume the risk of a misconnection, and furthermore because the UK is so competitive for air fares, you may not save money.

A smarter way to do it is to build in a stopover of 24 hours or more at the connecting point. The airline should automatically charge you the lower rate. In effect, since you are saving £65, the chancellor is paying for a short break for you.

Reykjavik and Istanbul are particularly good for North America and Asia/Africa respectively.

What if I fly in economy on the first leg but business for the rest?

If you are on a through ticket, the business-class rate applies to the whole journey.

If I book a flight and don’t show up for it, who keeps the tax?

The airline. While carriers collect APD up to a year in advance, the obligation to pass it on to the government crystallises only when the passenger flies. In theory you can claim it back, but in practice some airlines and travel agents impose fees that are designed to render attempts pointless.