Rachel Reeves is in line for a multibillion-pound tax windfall as the war in the Middle East drives up energy prices. A new analysis has suggested that the Government is raising about £20million a day in extra revenue through levies and taxes linked to the price of oil and gas.

The additional revenue also includes billions of pounds levied from North Sea oil and gas profits, power generators and VAT on petrol sales. If fuel prices were to remain at their elevated level for 12 months, the Treasury would bring in an extra £8billion a year, compared with the most recent forecasts, The Times revealed. Now, Starmer’s Government is being urged by lobbying groups to use the cash to protect households and drivers from the spiralling cost of energy as war rages on between Donald Trump and Iran.

Following the US and Israel‘s first attack on Iran on February 28, the price of petrol is now at a 28-month high, while diesel has hit a record £2 a litre.

The Government’s additional tax yield was calculated on the basis of 2025 figures from the Office for Budget Responsibility (OBR) by Chris Wheaton, an energy industry analyst at the financial services firm, Stifel.

He estimated that, based on current wholesale prices, the Government would make about £3.5billion a year more from the energy profits levy on North Sea oil and about £2.4billion more from gas sales.

The levy imposes an effective headline tax rate of 78% on oil and gas profits, increasing Treasury revenues as the wholesale price rises. The Treasury is also expected to raise hundreds of millions of pounds in taxes from Britain’s power generators, which are now facing excess profit levies introduced in the aftermath of the war in Ukraine due to rising wholesale electricity costs.

Household energy bills could also increase by £288 a year in July, according to the latest forecasts from analysts Cornwall Insight.

Howard Cox, the founder of FairFuelUK, said the Government should cut fuel duty, while the TaxPayers’ Alliance pressure group accused the Government of “cashing in on higher energy prices while taxpayers are squeezed”.

However, Government sources have warned that any additional revenues could be more than offset by higher borrowing costs, which have also risen sharply due to the conflict.

On Tuesday afternoon (March 31), Sir Keir Starmer chaired a Cobra crisis committee meeting to consider the impact of soaring energy costs on households and the wider economy. Ms Reeves has already indicated that targeted help for poorer households could be available if bills continue to rise.

Energy consumers minister Martin McCluskey said: “Tackling the affordability crisis is our number one priority. I know many families will be thinking about how events in the Middle East might impact the cost of living at home. We will continue to fight people’s corner through this crisis.”

A Treasury statement said: “We understand people are worried about how global conflicts could affect the cost of living. It’s still too early to know the full impact of this crisis. But as the Chancellor said, she will take the necessary decisions to support families and protect public finances.”