The windfall tax on oil and gas firms will be suspended if prices fall to normal levels for a sustained period, the UK government has announced.
Halting the windfall tax would cut the overall tax rate on energy firms from 75% to 40%.
It was introduced last year to help fund a scheme to lower energy bills for households and businesses.
Energy firm profits have soared recently, initially due to rising demand after Covid restrictions were lifted, and then because Russia's invasion of Ukraine raised energy prices.
But oil and gas prices have now come down from their highs.
In a statement, the Treasury said the windfall tax would remain until March 2028 but that the tax rate would fall if the average oil and gas prices fall to, or below, a set level for two consecutive three-month periods.
The level has been set at $71.40 per barrel for oil and £0.54 per therm for gas.
Brent crude oil was trading at $75 per barrel on Friday morning, with gas prices at around £0.62.
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