Chancellor Jeremy Hunt has revealed that the Energy Profits Levy, also known as a windfall tax, will increase from 25% to 35%.

This was brought up as part of the Autumn Statement, and this measure will be in effect from January 2023 until March 2028.

Mr Hunt told the Commons: “I have no objection to windfall taxes if they are genuinely about windfall profits caused by unexpected increases in energy prices.

“But any such tax should be temporary, not deter investment and recognise the cyclical nature of many energy businesses. Taking account of this, I have decided that from January 1st until March 2028 we will increase the Energy Profits Levy from 25% to 35%.”

Additionally, a 45% temporary levy on electricity generators is being put in place, which Mr Hunt says should raise £14 billion next year.

What is windfall tax?

The term windfall tax is being spoken about in relation to the huge profits made by oil and gas companies operating in the North Sea, such as BP and Shell.

Generally, though it refers to a tax levied on an unforeseen or unexpectedly large profit, which a company benefits from something they were never responsible for.

Gas prices have risen to very high levels over the course of this year, partly due to gas supply issues caused by Russia's invasion of Ukraine.

READ MORE: Jeremy Hunt raises national living wage in Autumn Statement

Helped by this BP made a profit of £7.1bn worldwide between July and September whilst Shell made £8.2bn in the same period.

BBC News reports that both companies have increased their dividend payments, which is the money they give directly to shareholders, as well as spending billions buying back their own shares on the market to boost their value.

Questions have been raised about whether these companies should help the average customer in reducing people's energy bills if they are making such large profits, so this windfall tax is a way of equalising that slightly.