Millions of families face soaring holiday costs as Rachel Reeves’s Budget plans include inflation-busting hikes in Air Passenger Duty.
Rachel Reeves is plotting tax grabs (Image: Getty)
Millions of British families could see their holiday costs soar due to plans for inflation-busting hikes in Air Passenger Duty.
As part of Chancellor Rachel Reeves’s upcoming Budget, a levy on air fares known as the “holiday tax” is set to be announced.
This could add hundreds of millions of pounds to the collective cost of air travel, as the Treasury looks to fill a £22 billion financial hole.
Treasury officials are reportedly analyzing economic performance data from the travel industry, assessing whether the sector can handle an increase in APD without significant disruption.
The levy, which is applied to air fares, could see an above-inflation rise in the October 30 Budget, further squeezing household budgets as air carriers typically pass the cost on to passengers.
A levy on air fares known as the ‘holiday tax’ is set to be announced. (Image: Getty)
This potential hike has already prompted a backlash from the aviation industry.
Ryanair CEO Michael O’Leary warned this week that further increases could result in the airline cutting hundreds of UK flights, especially on domestic routes that are “barely breaking even.”
O’Leary criticized the APD as a “penal tax on the poor,” adding that such a move could hurt the UK’s tourism sector, which is still recovering in a post-Brexit environment.
The expected APD hike is just one of several controversial measures being considered.
Reeves is also reportedly planning to extend the freeze on income tax thresholds beyond 2028, dragging more people into higher tax brackets.
Additionally, there are concerns about a potential overhaul of inheritance tax and a rise in fuel duty, which could see an extra 7p per litre at the pumps.
Conservative transport spokesperson Helen Whately criticized Labour’s plans, she said: “Any tax hike – including on family holidays – will be a political choice made by the Labour Government.”
She added that Labour had promised not to raise taxes over 50 times during the election and would be held accountable.
A Treasury spokesperson confirmed that “difficult decisions lie ahead” but stopped short of confirming specific measures regarding APD.
The APD system was revamped in April last year, introducing a three-tier system based on flight distance and carbon emissions. Passengers currently pay between £13 and £202 in APD, depending on the length of their flight and ticket class.
