In a move welcomed by the tobacco industry, UK chancellor Jeremy Hunt has announced a planned ‘vape levy’.
The proposals look to be some of the most severe and complicated in the world, and will (at least) double the cost of vaping for most vapers.
In this post, we’ll take a look at what’s planned, what the likely impact will be and what will happen next.
Contents
- What’s the current rate of tax on vaping?
- When will the new vape tax be introduced?
- How much will the vape tax be?
- How expensive will vaping be compared to smoking?
- How will the vape tax affect shortfills and DIY e-liquid?
- What do vape businesses need to know?
- What will it mean for vapers and smokers?
- What happens next?
- Related posts
- External resources
- FAQs
There is no specific tax rate on vape products at present, which means vapes are taxed at the standard 20% VAT rate. In theory, medically licensed vapes can be prescribed with a reduced rate of 5%. In practice, this doesn’t happen as no effective device has gained medical licensing.
Hunt has told us that the vape tax will be introduced on 1st October 2026 following a consultation. This length of time suggests some of the challenges and complexities faced in dealing with vaping - a challenge that this government may well be grateful to shunt onto a future Labour administration.
Current proposals are to tax the nicotine in e-liquid, although zero nicotine e-liquid will also be taxed. The higher the nicotine, the higher the tax:
Tier | Nicotine strength | Tax (per 10ml E-Liquid) |
1 | 0% (0mg) nicotine | £1.00 |
2 | 0.1-1.09% (0.1-10.9mg) nicotine | £2.00 |
3 | 1.1-2% (11-20mg) | £3.00 |
However, we need to remember that VAT will also be applied. That adds an extra 20% to the cost of the tax.
The average price of a bottle of 10ml e-liquid would change as follows:
- 10ml 18mg: From £3 to £6.60
- 10ml 10mg: From £3 to £5.40
- 10ml 0mg: From £3 to £4.20
- 50ml shortfill: From £10.00 to £22.00
- 100ml shortfill: From £12.50 to £22.50
- Nicotine shot: From £1.00 to £3.00
A prefilled pod with over 10mg of nicotine would increase in price by 60p, while a 100ml shortfill would increase in price by £10.
We’ve broken this down further to show the potential cost for several typical users:
Nicotine strength | Amount vaped | Cost per month |
18mg | 10ml per day | £198 |
18mg | 10ml per 2 days | £99 |
18mg | 10ml per 3 days | £66 |
10mg | 10ml per day | £162 |
10mg | 10ml per 2 days | £81 |
10mg | 10ml per 3 days | £54 |
The results would make the UK one of the most expensive countries in the world for vaping, with only four other countries charging a higher tax for higher-strength e-liquids.
The government states the tax on cigarettes will increase by an extra £2 per hundred cigarettes and per 50 grams of tobacco to keep the price differential between vaping and smoking. That equates to an extra 2p per cigarette.
To justify the tax, the government is comparing the amount of puffs from a 10ml bottle of e-liquid to that from 100 cigarettes.
It’s not clear what puff length they are measuring, or if they take into account the fact that vapers take long, slow drags from a vape compared to short sharp puffs from a cigarette.
However, we can look at the amount of nicotine.
According to Medical News Today, the average cigarette contains 11.9 - 14.5mg of nicotine. That means 100 cigarettes will contain between 1190 and 1450 mg of nicotine. In comparison, the strongest e-liquid available contains 200 mg of nicotine - less than one fifth that found in a cigarette.
Vaping will still be cheaper than legal cigarettes, although the price differential will decrease. Cigarettes are set to rise to an average price of £80 per 100, while 7 bottles of e-liquid at the highest strength available will cost £46.20.
Some vapers mix their own e-liquid, which can vary from mixing shortfills with nicotine shots to using flavour concentrates and VG:PG mixes.
There would be a big incentive for 10ml vapers to start mixing their own e-liquids, especially now that 50:50 shortfills are available, as well as other alternatives.
The savings would be significant. For example, a vaper buying a 100ml shortfill e-liquid and 2 nicotine shots would pay £8.00 less in vape tax than…
Given the complexities, HMRC is still uncertain about how to deal with these products.
HMRC has suggested that people who mix their own e-liquid could be treated as manufacturers, and have to register with the HMRC and pay duty. Alternatively, products designed for mixing could be charged duty on the intent to use.
However, as we’ve pointed out to HMRC:
- In reality, DIY mixers are not going to register.
- While it’s rare, some people do vape unflavoured nicotine - and more people vape zero nicotine shortfills. This makes it very difficult to tax these products on the basis they will be mixed.
- Any move to add additional tax on products used for mixing will create a perverse incentive for vapers to use mixing materials not designed or tested for inhalation, as well as potentially dangerous black market nicotine.
In short, it’s not yet clear how the regulations will affect shortfills and DIY vape products.
If you’re a vape business, you’ll need to understand that the tax is paid when goods are imported or manufactured, not when they are sold. This will require a huge investment by those vape businesses able to do so.
For example, suppose your stock level is 10,000 bottles of e-liquid. Assuming an average tax of £3.50 per bottle, you would need to pay £35,000 over and above your normal purchase cost to replace that stock.
If you manufacture e-liquid or hold e-liquid before tax is paid, your premises will need to be registered with and approved by the HMRC, with security information and other details supplied. The tobacco industry is also keen for the HMRC to implement a track and trace system which, because of the cost and complexity involved, could eliminate smaller manufacturers.
(To show the complexity of the track and trace, the UK government allowed five years for the implementation of track and trace for cigarettes and rolling tobacco, and ten years for other tobacco product.)
Smoking and vaping rates
When asked about the introduction of vaping taxes, British American Tobacco (BAT) chief executive Tadeu Marroco said:
“I think that could be a good idea, I think that we need more regulation”.
That gives a clue to the likely impact on smoking rates. In other countries where taxes have been put in place, the results have led to an increase in smoking and a decrease in vaping.
When a vape tax was applied to Italy, it led to a 70% decrease in the number of vapers, and an increase in the use of illegal and imported e-liquid The number of vape shops also fell from 4000 to 1000, costing approximately 10,000 retail jobs. (Source: Vaping 360)
Research in the USA found that a $1 tax leads to a significant decrease in vaping rates and an increase in smoking rates. (Source: Friedman and Pesko, 2022). A separate study, also by Pesko, found that vape taxes also increase smoking in pregnant women by 6%. (Source: Georgia State University, 2019).
The government hopes that keeping a differential between the price of cigarettes and vape products will deter people from reverting to smoking. However, research by Professor Notley found many young people who smoke do so using illegal tobacco, and already find it cheaper than vaping.
Finally, it’s also worth noting that the vape tax will incentivise vapers to use lower nicotine strength e-liquids. When smokers try to switch using lower nicotine strengths, they are less likely to succeed, which may further reduce switching rates.
Black market sales
According to Trading Standards, the black market already accounts for one third of vapes sold in the UK. Tests have found that black market products are significantly more harmful than legal vapes.
There’s little research into the effect of specific vape taxes on the black market. However, restrictions in Australia, where vapers are forced to have a prescription in order to vape, have meant an estimated 90%+ of vapers now buy vapes illegally.
Effect on competition
The impact on smaller businesses will not just be increased tax and reduced demand - it’s also the complexity of dealing with regulations, and the need to pay the tax before goods are sold.
This is likely to lead to reduced competition in the market, reducing choice and potentially further increasing costs - in effect, exactly what’s happened in the tobacco industry.
The government is holding a consultation for individuals, organisations and businesses. It’s crucial that we respond.
Let’s also remember the numerous serious threats to vaping, including coming weeks away from a ban in the UK in 2012. Vigorous protest has led to compromises that may not have been ideal but have enabled millions of smokers to switch to vaping.
Once again, there are likely to be protests, including petitions (although letter writing is more effective).
To have any chance of getting a more reasonable tax regime, whether that's with the current government or, more likely, a new Labour government, it’s also key to support organisations like the New Nicotine Alliance (for consumers) and the Independent British Vape Trade Association (for businesses).
Finally, let’s end with some words from Louise Ross, Chair of the New Nicotine Alliance:
‘We urge all vapers and supporters of tobacco harm reduction to write to their MP, explaining briefly and respectfully how this proposed tax on vape liquids will have unintended consequences and will not help the cause of public health in any way. Also, please do share the NoVapeTax website with friends and let’s make an impact while we still can.’
- Should Vape Retailers Be Licensed?
- Are Vapers Like You Paying for Lost Tobacco Tax Revenue?
- UK Gov Mulls Flavour Ban and Vape Taxes
- Smoke Without Fire? The Truth About Vape Safety
- Vaping Products Duty Consultation (UK Gov)
- IBVTA statement on today’s budget announcement of a duty on liquids (IBVTA)
- A tax on vaping liquids is irresponsible, will cost lives, and further erodes the UK’s former world-leading
tobacco control strategy (New Nicotine Alliance) - New High Nicotine Vaping Tax Could Drive Riskier Habits (London South Bank University)
- No Vape No Tax
What will happen to people who make their own e-liquid?
The government is actively consulting on what actions they should take to regulate home production of e-liquid. In reality, this would be difficult to control, and home production would likely increase.
What problems could taxing the nicotine in e-liquid cause?
Both smokers and vapers ‘self-titrate’. This means that they adjust their inhalation to extract the amount of nicotine they desire from smoke or vapour. As they use lower nicotine products, they increase the amount they vape or smoke. In fact, one study found that when vapers switch to lower-strength nicotine they double the amount they vape. (Dawkins et al, 2016.)
However, it’s not the nicotine that causes smoking diseases, it’s the smoke. While the UK government itself states that vaping is at least 95% less harmful than smoking, any residual harm is likely to come from vapour, not nicotine. If people increase the amount they vape because they switch to a lower level of nicotine, they could increase residual harm from vaping.
What does payment at the point of manufacture mean?
If the business works with the HMRC to agree a suspension duty, excise will be paid at the time when a product is released for sale. If not, duty should be paid when the product is manufactured.
Will the vape excise be applied to stop smoking services?
At present, the plan is to apply the e-liquid tax to all products, which would include those sold to stop smoking services. However, there is an opportunity to respond to this in the consultation.
Will the tax apply to alternative nicotine products such as nicotine pouches?
Alternative products such as nicotine pouches and strips are not included in the proposals. However, the government is asking for opinions on whether they should be taxed in its consultation.