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The UK government announced a new tax on vapes during the Budget in an effort to discourage non-smokers from taking up the habit, as part of twin tax hikes on tobacco products that will generate more than £600mn in extra revenue for the Treasury.
Chancellor Jeremy Hunt told MPs on Wednesday that the vaping excise duty will be implemented in October 2026 following a consultation period. The government will also introduce a one-off increase in cigarette duty “to maintain the financial incentive to choose vaping over smoking”, the chancellor said.
But the chancellor shied away from increasing alcohol duty in order to help the ailing pub sector, instead extending a tax freeze, initially planned to run until August this year, through to February 2025. “We value our hospitality industry and are backing the great British pub,” the chancellor said, adding the measure would help 38,000 pubs.
While an unlikely coalition of tobacco control advocates and cigarette makers such as British American Tobacco both embraced a tax targeted at vapes — which has already been introduced in several EU countries, such as Germany and Portugal — the UK hospitality sector gave the chancellor’s alcohol duty freeze a lukewarm reception.
Kate Nicholls, chief executive of UKHospitality, an industry body, said the chancellor delivered “a cut-and-paste Budget, maintaining the status quo, which continues to act as a drag on recovery”. Nicholls said the government had done little “to bear down on the never-ending rising costs” by rejecting calls to lower VAT and cap business rates for the hospitality sector.
Steven Alton, chief executive of the British Institute of Innkeeping, which represents the independent pub sector, said: “The freeze on duty until February next year will not help pubs, who have been facing huge inflation in every area of their business, high energy costs, wage rises and reduced footfall from consumers facing their own cost of living crisis.”
The vape excise duty is expected to raise £445mn by 2028-29, according to Treasury projections, while the rise in tobacco duty will raise an extra £170mn by the same year.
Tadeu Marroco, BAT’s chief executive, told the Financial Times on Wednesday that he thought a vape tax was “a good idea”, adding that BAT had learnt to “love regulation”.
Earlier this year, the UK government announced a crackdown on disposable vapes and flavoured e-cigarettes, which have been blamed for a surge in underage usage. The government also plans to hold a free vote on world-first plans to ban the sale of cigarettes for anyone born on or after January 1 2009.
Plans for a vaping tax were met with criticism from the UK Vaping Industry Association, which represents smaller vaping manufacturers rather than Big Tobacco. The industry body wrote on X: “The Chancellor said ‘we value our alcohol industry and are backing great British pubs’ . . . but what about the vape industry, which has been instrumental in bringing the UK’s smoking rates down to a record low?”
