 HMRC has confirmed changes to the Electricity Generator Levy (EGL) effective from 1 July 2026. The update revises how the levy applies to electricity generators, including transitional rules for accounting periods.
The UK HM Revenue & Customs (HMRC) has confirmed changes to the Electricity Generator Levy (EGL), increasing the rate from 45% to 55% with effect from 1 July 2026, according to a policy paper released on 6 May 2026.
The EGL applies to certain electricity generators, mainly renewable operators such as wind and solar, that benefit from higher market prices when gas sets the marginal price of electricity. During periods of elevated gas prices, these generators can earn higher revenues without facing equivalent increases in input costs.
The levy was introduced in 2023 as a temporary charge on so-called windfall revenues from large renewable electricity producers. It is currently calculated at 45% of annual revenue above a benchmark price, set at £82.61 per MWh and indexed to inflation from 2024. New renewable investments remain outside the scope of the tax.
Under the revised framework, the increased 55% rate will apply to receipts from electricity generated on or after 1 July 2026. For accounting periods that span this date, revenues will be split on a time-apportioned basis, with the higher rate applied to the later portion.
Where companies make quarterly instalment payments, HMRC has confirmed that the higher liability does not need to be reflected before Royal Assent of the legislation. Any additional charge will instead be included in the first payment due afterwards, with interest applied where relevant.
The government said the adjustment follows a review of the EGL in light of sustained high energy prices linked to geopolitical tensions, including the conflict in the Middle East. It also confirmed that the levy will be extended beyond its original planned expiry in 2028.
Officials said the change is intended to moderate the impact of gas-driven electricity prices on households and businesses, while encouraging greater participation in Contracts for Difference schemes designed to reduce exposure to volatile wholesale gas prices.
