Amended rate of the Electricity Generator Levy — 2026 to 2027
Published 17 June 2026
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Who is likely to be affected
Companies and groups of companies that undertake electricity generation in the UK and are connected to either the national grid or local distribution networks and equivalent networks in Northern Ireland.
General description of the measure
This measure increases the rate at which the Electricity Generator Levy (EGL) is charged from 45% to 55% from 1 July 2026.
The EGL is a charge on exceptional receipts generated from the production of wholesale electricity. Exceptional receipts are defined as amounts from wholesale electricity sold at an average price in excess of a benchmark price over an accounting period. This benchmark price is adjusted in line with the Consumer Price Index and is set at £82.61 from 1 April 2026 to 31 March 2027.
Policy objective
The EGL taxes a portion of generators’ extraordinary returns, while allowing them to make a return on investment. Some legacy renewable energy generators stand to benefit from a disparity, where the price of electricity is determined by gas prices, making possible a windfall return without any new costs or risks.
The rate increase will support the government’s objective of reducing the impact of gas prices on businesses and households in two main ways. Firstly, it will encourage participation at a competitive price in wholesale Contracts for Difference, a new proposal which seeks to weaken the link between high gas prices and high electricity generation prices. Secondly, it will ensure a proportion of any exceptional revenues resulting from the passthrough of high gas prices to electricity generators’ revenues is available to government to support businesses and households with the impacts of the conflict in the Middle East on the cost of living.
Background to the measure
The EGL was originally announced on 26 May 2022 and applies from 1 January 2023. The increase in the rate was announced in a Written Ministerial Statement on 21 April 2026, alongside the government’s intention to extend the EGL past its scheduled conclusion in 2028, with that extension to be legislated in due course. An HMRC Technical Note was published on 6 May 2026.
Detailed proposal
Operative date
The 55% rate will apply to receipts attributable to electricity generated from 1 July 2026.
The EGL is charged on receipts attributable to a ‘qualifying period’ that corresponds to a Corporation Tax accounting period. Where a qualifying period straddles the commencement date of 1 July 2026 the receipts for the period must be apportioned on a time basis and the amount attributable to the later part of the period charged at 55%, whilst amounts attributable to the former part will be charged at 45%.
Where a large or very large company is required to make quarterly instalment payments then the increase in instalment amount resulting from the change in the EGL rate does not need to be reflected in instalment payments made before the date that the legislation receives Royal Assent. Interest will be applied accordingly.
Current law
The Electricity Generator Levy is provided for in Part 5 of Finance (No. 2) Act 2023. The rate is set in section 279(1) of that Act .
Proposed revisions
This measure will amend the Electricity Generator Levy rate set out at section 279(1) of Finance (No. 2) Act 2023 and provide for the transitional provision described above under ‘Operative date’.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There are not expected to be any direct impacts on individuals as this measure only affects businesses. Wholesale electricity prices are tied to the price of gas and the levy is unlikely to affect the retail price of electricity for households.
Equalities impacts
This measure only affects businesses, therefore it is not anticipated that there will be disproportionate impacts on any protected groups.
Administrative impact on business including civil society organisations
This measure will have a negligible impact on the administrative burdens of an estimated 50 groups that earn revenues from significant UK generation output. Impacted businesses will need to make an adjustment to their calculation of liability to take account of the operative date of the change. There will be no on-going costs to businesses as a result of this measure.
This measure is not expected to impact civil society organisations.
This measure is expected overall to have no impact on businesses’ experience of dealing with HMRC as it only involves a change to the rate of the EGL.
Operational impact (£ million) (HMRC or other)
We do not expect any additional operational impacts as a result of this change.
Other impacts
Environmental impacts have been considered in the design of the levy. While low-carbon electricity generation is subject to the levy, the impact on generators’ incentive to generate and invest in clean energy has been mitigated by setting the benchmark price at a level which is high by historic standards and rises each year with inflation, allowing them to retain a significant proportion of their exceptional returns. New generating stations, where the substantive decision to proceed with the project was taken on or after 22 November 2023, are also exempt from the EGL entirely. Other impacts have been considered and none have been identified.
Monitoring and evaluation
The Electricity Generator Levy will continue to be monitored through information collected from companies’ Corporation Tax returns.
Further advice
If you have any questions about this change, please contact HMRC by email: egl@hmrc.gov.uk.
Declaration
Daniel Tomlinson MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.