Budget outlines increases in vaping tax and tobacco duties

The expenses associated with vaping and smoking are set to rise following tax increases detailed in Chancellor Rachel Reeves’ Budget. A new levy on vapes, amounting to £2.20 per 10ml of e-cigarette liquid, will become effective in October 2026. This will be accompanied by a corresponding increase of £2.20 per 100 cigarettes in tobacco duty, designed to “maintain the financial incentive to switch from tobacco to vaping”. Reeves also announced immediate duty increases that surpass inflation, specifically 2% for tobacco and 10% for hand-rolled tobacco. Regarding alcohol duties, she declared that, from February 2025, a 1.7% reduction in draught beer duty would be implemented, aiming to shave “a penny off a pint in the pub”. However, rates for non-draught products, such as wine and spirits, will see an increase based on the higher RPI measure of inflation. In defense of the rise, the chancellor stated that “two-thirds of alcoholic drinks sold in pubs are served on draught”. The UK Spirits Alliance (UKSA) characterized the hike as a “kick in the teeth”, adding: “Today’s decision won’t stop thousands more pubs and distillers closing down.” Conversely, Katherine Severi of the Institute of Alcohol Studies welcomed the initiative, asserting it would “help narrow the widening gap in affordability between pub and supermarket alcohol”. She further commented: “There are both public health and economic reasons to move people back to drinking in pubs and not at home.” In its final Budget before losing the election, the previous Conservative government had expressed its intention to introduce a vaping tax and initiated a consultation on the proposed changes. The consultation indicated that the tax aimed to make vaping “less accessible to young people and non-smokers while also raising revenue for funding vital public services like the NHS”. It had put forward different tax levels based on the nicotine content in the vaping liquid. Nevertheless, Reeves has instead opted for a flat rate. In its analysis of responses to the vaping consultation, the government reported that industry representatives and some public health bodies had opposed a three-tier structure, warning it could lead to unintended consequences and create complex bureaucracy. John Dunne, Head of the UK Vaping Industry Association, described the vape tax as a “nonsensical move” that penalized individuals who used vapes as a method to quit smoking. He said: “Some three million adults are former smokers thanks to vaping, which is strongly evidenced as the most effective way to quit conventional cigarettes, saving the NHS millions of pounds in treating patients with smoking related conditions.” The new Labour government had previously stated its objective to prevent vapes from being branded to appeal to children, and has announced a prohibition on single-use vapes, scheduled to take effect in England in June 2025. Ministers have also committed to continuing plans, initially set out by former Prime Minister Rishi Sunak, to ban people born in or after 2009 from purchasing cigarettes. In a measure designed to encourage manufacturers to reduce the sugar content in beverages, the Budget confirmed an increase in the sugar tax, officially known as the Soft Drinks Industry Levy. Currently, milk-based drinks are exempt. However, the government has indicated that this will now be reviewed. Copyright 2024 BBC. All rights reserved. The BBC bears no responsibility for the material on external websites. Information regarding our policy on external linking is available.