The cost of vaping and smoking is set to increase with tax increases announced in Chancellor Rachel Reeves’ budget.
From October 2026, a new tax of £2.20 per 10ml of e-liquid will be levied on e-cigarettes.
At the same time, tobacco tax will increase by £2.20 per 100 cigarettes to “maintain the financial incentive to switch from tobacco to e-cigarettes”.
Reeves also stipulated that tobacco prices will immediately be 2% above the inflation rate, and the price of hand-rolled tobacco will increase by 10%.
On alcohol duties, she said draft beer duties would be reduced by 1.7% from February 2025 to “save one penny a pint in pubs”.
However, rates for non-drink products such as wine and spirits will rise due to higher RPI inflation measures.
The chancellor defended the rise in drinks, saying “two thirds of alcoholic drinks sold in pubs are draft”.
The British Spirits Alliance (UKSA) called the price rise a “blow in the face”, adding: “Today’s decision will not prevent more pubs and distilleries from closing.”
However, Katherine Severi of the Alcohol Institute welcomed the move, saying it would “help close the growing affordability gap between alcohol in pubs and supermarkets”.
“For public health and economic reasons, people should be returning to pubs rather than drinking at home.”
In its last budget before losing the election, the previous Conservative government said it wanted to introduce an e-cigarette tax and consult on the changes.
The purpose of the tax is to “reduce access to e-cigarettes among young people and non-smokers, while raising revenue to fund vital public services such as the NHS,” the consultation said.
It proposes different levels of tax based on the nicotine content of e-cigarette liquids. Reeves, however, opted for a flat rate.
In an analysis of e-cigarette consultation responses, The government said industry representatives and some public health agencies opposed the three-tier structure, warning it could lead to unintended consequences and create a complex bureaucracy.
John Dunne, chairman of the British E-cigarette Industry Association, called the e-cigarette tax a “ridiculous move” that punished people who use e-cigarettes as a method of quitting smoking.
He said: “Around three million adults have stopped smoking thanks to e-cigarettes, which have been well proven to be the most effective way to quit traditional cigarettes, saving the NHS millions of pounds spent treating patients with smoking-related diseases. “
The new Labor government has said it wants to stop the branding of e-cigarettes to appeal to children and has announced a ban on disposable e-cigarettes, which will come into force in England in June 2025.
Ministers also pledged to continue plans set out by former chancellor Rishi Sunak to ban people born in 2009 or later from buying cigarettes.
In a measure designed to encourage manufacturers to reduce the amount of sugar in drinks, the Budget confirmed an increase in the sugar tax, formally known as the soft drinks industry levy.
Milk drinks are currently exempt. However, the government said this will now be reviewed.
