Chancellor Rishi Sunak has introduced a "temporary targeted profits levy" on the unexpected profits of energy companies, U-turning on the Government's previous position.

The 25% tax will apply on the unanticipated profits energy companies have made during the period of high energy prices.

At the same time, the new levy will include a new 80% investment allowance, which the Government said "allows [it] to deliver support to families, while encouraging investment and growth".

Earlier this month, Conservative MPs voted down a Labour motion to introduce a similar tax on oil and gas companies.

The Government hopes the levy will raise about £5 billion of revenue to help fund a new £15 billion energy support package for the people struggling the most during the cost of living crisis.

Sunak said 8 million households would get a one-off "cost of living payment" of £650, directly to people's bank accounts.

The levy will be phased out when the current high prices of energy fall, with a ‘sunset clause' written into the legislation.

Hannah Essex, co-executive of the British Chambers of Commerce, said:

"The sheer scale of the cost-of living crisis facing the British public means the Government is absolutely right to provide additional support to those worst affected."

Talk to us about your finances.

Ready to get started? Let’s hear how we can help

Our team is excited to find out what we can do for you. Put simply, we love working with new clients – it’s challenging and rewarding in equal measure, so if you think we can offer you something, please reach out to us. We’re all ears.