Autumn Budget 2024 – Implications for the Energy and Infrastructure Sector - Forvis Mazars

Investment in renewable energy

Investment in renewable and clean energy is essential for the UK to meet its net zero commitments and enhance energy security. The focus on clean energy especially in sectors such as Carbon Capture, Utilisation and Storage (CCUS) and Hydrogen will provide a vital boost to the green energy sector and, hopefully, act as a catalyst for further growth and development. The announcement of the first investment project for Great British Energy marks an important milestone in the UK’s journey toward becoming a world leader in green energy production. This investment is anticipated to spark further growth and innovation within the sector, enhancing the UK’s competitive edge in the global market.

Infrastructure developments

In addition to green energy investments, the Chancellor outlined plans for Nationally Significant Infrastructure Projects (NSIPs). Recent planning changes have resulted in construction consent for four solar farms, an electricity transmission network, and a new port consent. These initiatives reflect the government’s commitment to supporting various other infrastructure projects, namely some school funds, certain hospital support and transport projects. However, the most significant changes are expected in Phase 2 of the Spending Review (set to conclude in late spring 2025), which will include a comprehensive 10-year infrastructure strategy. Stakeholders will be looking for clarity on potential investment models, such as PFI2 or the Welsh Mutual Investment Model.

From an overall energy and infrastructure perspective, there has certainly been a lot of intent outlined from the Chancellor in the Budget, but it will be in early 2025 that we have more details on what this will involve in the long term.

Other tax measures to consider

The budget also introduced key tax measures that will affect the energy and infrastructure sector:

An increase in the rate of the employer’s NIC: The rate will rise from 13.8% to 15%, with a reduction in the earnings per employee threshold at which the employer’s NIC is payable. This will impact businesses' budgets from April 2025. It may also influence recruitment plans and project viability, although the increased capital funding may help to ameliorate some of these concerns.
Capital gains tax changes: Higher rate payers will see an immediate increase from 20% to 24%. While these changes primarily impact asset disposals, the retention of Business Asset Disposal Relief (BADR) may encourage some development assets to be brought to market before the new rates take effect. Fund executives and managers who remain significantly remunerated via “carried interest” will now suffer an increased capital gains tax rate of 32% on this (up from 28%), before carried interest is brought fully within the income tax regime from April 2026.
Corporate tax landscape: The headline rate of corporation tax remains at 25%, but full expensing of capital expenditure has been maintained for the parliamentary term. This is particularly beneficial for capital-intensive projects within the energy sector.
Revisions to inheritance tax rules: There will be incoming revisions to inheritance tax rules for business property relief and agricultural property relief which will have a combined nil rate of up to £1m and an effective 20% rate thereafter (from April 2026). Additionally, pension pots will no longer be excluded from being brought into an individual’s chargeable estate (from April 2027).
Increase in windfall tax: The windfall tax for the oil and gas sector has increased to 38%. Previous allowances for offsetting investment expenditures have been curtailed, but now only apply to decarbonisation initiatives. However, no changes were announced regarding the Electricity Generation Levy, which, while beneficial for renewables, is still viewed as punitive.
Electricity Generator Levy: No equivalent changes were announced in respect of the Electricity Generation Levy which will be a crumb of comfort for those operating in the renewables space. These rules had effectively been limited to a one-off charge on existing operations, by amending the application of the rules at the last Budget so that they didn’t apply to new projects created or investments made after November 2023. More recently, the reduction in electricity prices has led to a reduction in liabilities. However, the retention of the tax is still seen as punitive for the renewables sector.

Looking ahead

There is a consultation proposed for the end of the year on the recent court decision in Gunfleet Sands, where some elements of development expenditure for an offshore wind turbine project were treated as being ineligible for capital allowances. The costs are broadly related to expenditures on environmental studies and other similar expenditures. The decision stands at odds with the wider Government stance of treating the majority of capital expenditure (other than land and residential buildings) as being eligible for tax deductions.

A large number of changes are also planned for transfer pricing in the UK, and this will be something to monitor over the coming months.

While the budget announcements have outlined a clear intent for advancing the energy and infrastructure sectors, the specifics of these initiatives will only become apparent in early 2025. The roadmap presented by the Chancellor promises a more stable business taxation landscape, with consultations planned to address recent judicial decisions impacting offshore wind projects.

Overall, the government’s renewed focus on clean energy and infrastructure investment signals a commitment to sustainable development. As the UK positions itself as a leader in the green energy sector, the upcoming phases of the Spending Review will be critical in determining how effectively these ambitions are translated into actionable policies and investments. Stakeholders should keenly observe how these developments unfold and what they mean for the future of energy and infrastructure in the UK.

Read our full expert analysis of what was announced during the Autumn Budget on our dedicated page below.