Vapes to be taxed for first time as tobacco and wine duty rise

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Vapes will be taxed for the first time in the UK from 2026 in a push to discourage non-smokers, Rachel Reeves said on Wednesday, as she set out increases in duty on tobacco and wine and spirits.

The chancellor’s Budget announcement on e-cigarettes, which have soared in popularity in recent years, comes a week after the government said single-use vapes would be banned in England and Wales from June.

It also follows a consultation on the measure by the previous Conservative government, whose plan to ban sales of cigarettes to people born on or after January 1 2009 has been taken forward by the current government.

A vaping products duty of £2.20 per 10ml vaping liquid will come into force in October 2026, while duty on 100 cigarettes will rise by £2.20 to “maintain the financial incentive to switch from tobacco to vaping”, the government said.

Ministers will renew the tobacco duty escalator for the rest of this parliament, adding 2 per cent to the retail price index of inflation, while raising duty on hand-rolling tobacco by 10 per cent this year.

The tax on vapes will only bring in £15mn by 2028-29, while the combined tobacco duty will add up to £180mn by the same year.

Asli Ertonguc, UK and western Europe head at British American Tobacco, welcomed the flat rate of tax on vapes, saying it would “allow for easier administration and aid excise collection”. But she added that it should take effect in 2025 “to tackle the illicit market that is already prolific in the UK”.

Imperial Brands said while it welcomed the application of an excise duty on vapes, “this must be matched with greater investment to ensure strict enforcement”, underlining the need to tackle a “thriving illicit market of non-compliant vapes”, such as high nicotine devices that are “too easily available to the public”. 

Nicky Small, director of corporate affairs and communications at tobacco manufacturer JTI, warned that the increase in tobacco duty would bring “profound unintended consequences” and drive consumption of cheaper, illegal products.

Reeves’ move would mean an increase of 66p per pack of 20 cigarettes and £1.58 for 30g hand-rolling tobacco, she said.

The chancellor also announced changes to the freeze in alcohol duty, which was set by then Conservative chancellor Jeremy Hunt in autumn last year and extended in the Spring Budget.

Alcohol duty on wine and spirits will rise in line with inflation from February, while duty on draught beer products — which accounts for 60 per cent of alcoholic drinks sold in pubs — will fall by 1.7 per cent, or 1 pence per average strength pint.

The UK Spirits Alliance, which represents more than 280 distilleries and microbusinesses, accused Reeves of a “kick in the teeth” over the rise in duty on spirits, adding that the decision would not “stop thousands more pubs and distillers closing down”.

Reeves said the reduction of draught duty would “recognise the economic and cultural importance of British pubs”. But pub companies hit out over added burdens to their operations, including the increase in the employers’ national insurance rate, a rise in the national living wage and cuts to business rates relief.

Chris Jowsey, chief executive of pub group Admiral Taverns, said: “Community pubs remain massively overtaxed and with the wider alcohol duty still increasing, the cost of doing business is only rising for our publicans.”

Nick Mackenzie, the head of Greene King, said the reduction in draught duty is a “drop in the ocean” compared with the overall cost increase.