Tax on Vaping Update: less complex, but no less harsh

The UK government's recent decision to introduce heavy taxation to e-liquid products is expected to have severely negative impacts on vapers, the vaping industry, and potentially public health.

Building off the back of a new vaping duty proposal that formed part of the spring budget from Jeremy Hunt earlier this year, Chancellor, Rachel Reeves, announced Labour’s version of the tax on vaping in her autumn budget, which will come into effect from 1st October 2026.

The proposed flat-rate tax of £2.20 per 10ml would place the UK 10th highest out of the 27 European countries that currently tax vape juice and will massively increase the cost of all e-liquids and prefilled pods.

Combine this with the upcoming ban on disposable vapes and the ongoing discussions around possible restrictions on flavour and packaging, and you’d be forgiven for getting mixed messaging from successive governments that have taken a generally supportive stance towards vaping as an effective tool to reduce smoking rates. 

The overwhelming majority of vapers are ex-smokers; they did what was asked of them and quit smoking. Now this government plans to punish them for it and potentially push them back to smoking. 

Let’s explore the vaping tax proposals in more detail and outline what the impact will look like.

What is the current tax on vaping?

Currently, there is no specific ‘sin tax’ on any vaping products, which means that vapes are only taxed at the standard VAT rate of 20%.

Medically licensed and prescribed vaping devices attract a reduced VAT rate of 5%; however, this isn’t applicable at this time, as no vape kits have been granted a medical license.

Why is a tax on vaping being introduced?

One reason the previous government cited for imposing a vaping duty was to raise revenue to support public services and bolster its ambitious plans to create a ‘Smokefree Generation’ and tackle youth vaping.

By taking the cost of vaping above so-called ‘pocket money prices’, over 70% of respondents to the public consultation in 2023 thought youth vaping would decrease and non-smokers would be deterred from vaping before they start.

Finally, as it’s an excise duty applied at the point of manufacture and import, there should be more eyes on imported products from Border Force and HMRC (in theory). If that is achievable with the current resource shortages across UK enforcement agencies, then it could result in more illicit vapes being seized at our borders.

How does the Labour tax on vaping differ from the Tory version?

The Conservative party's proposal was ridiculously complicated and likely unenforceable. Jeremy Hunt proposed taxing e-liquids based on their nicotine content. The higher the nicotine content, the higher the tax. Zero-nicotine e-liquids didn’t escape their taxation plans, albeit at the lowest level.

Bear in mind that excise tax is also subject to VAT, so an extra 20% would have also been added. That's a £1.20, £2.40, or £3.60 price increase per 10ml of e-liquid! 

What would this have looked like?

How much tax will be added to vape juice under Labour?

Compare this to the new vaping products duty, which will be introduced on 1st October 2026. This will be a flat rate of £2.20 per 10ml of e-liquid (regardless of nicotine content).

Remember though, the £2.20 additional cost is subject to VAT, so will actually increase the price of a 10ml bottle by £2.64.

The decision to switch from strength to volume was, in part, following concerns that smokers could choose cost over cravings, risking them not being satisfied by vaping and switching back to tobacco. 

While this method of taxation is far easier to understand and implement, it is actually far more punitive against the most environmentally friendly and least appealing style of vaping to minors - shortfills. 

On the flip side, the least sustainable option and the style of vaping most favoured by under-18s (after disposables) - prefilled pods - will attract the lowest price increase.

Make it make sense! 

What this will look like in reality:

Smokefree by 2030???

This will make the UK one of the most expensive countries in the world to be a vaper. Considering our historically supportive stance on vaping in the role of harm reduction contrasts sharply with other countries where restrictions and bans are commonplace, this is a massive backstep.

The UK government has aimed to significantly reduce smoking rates by promoting safer alternatives like vaping. The NHS has also acknowledged vaping as a smoking cessation tool, and, in some NHS facilities, e-cigarettes have even been sold in hospital shops or permitted for use. This is a notable shift from the strict no-smoking policies traditionally enforced in medical settings. 

A price hike would undermine these goals by making vaping less accessible to those who would otherwise use it to quit smoking. It would also disproportionately affect people from lower-income backgrounds, who statistically have higher smoking rates and benefit the most from affordable, less harmful alternatives.

How will the vaping industry be affected by this tax?

Increased taxes will push up consumer costs and reduce the demand for vaping products, quickly pricing smaller retailers out of the market.

As it is an excise tax, the manufacturers add the cost, which means that only businesses large enough to swallow the vast rises in upfront investment will be able to continue trading. However, only the very largest in the vape industry will survive long-term as demand reduces.

This will reduce job opportunities and economic activity within the vaping sector, potentially harming local economies where these businesses operate.

Vape manufacturers will also take a hit

The vaping industry is renowned for its swift innovation and healthy competition. As long as the products are safe, effective, and value for money, we welcome anyone to bring a new brand to the market.

The tax hike would reduce funds available for research and development, as companies may need to cut costs to maintain profitability. This would slow the development of safer and more effective vaping technologies.

It would also mean that only established brands would have a chance of weathering the storm. This would reduce market competition and consumer choice, thereby leading to further increases in costs. 

In the long run, only tobacco manufacturers, with their enormous profit margins, may be able to swallow this new tax on vaping without needing to increase their prices. 

We might find that in the future, only vape products made by tobacco companies will be available to consumers. If people keep vaping, they keep selling. If people switch back to smoking, they get that sale as well!

Are there any other implications of the vaping tax?

Black market boom

As with any high-tax product, there is a huge risk of black market growth. Consumers may turn to unregulated or illicit sources to find cheaper vaping products. These products typically lack safety checks, increasing health risks due to unknown or poor-quality ingredients.

There is already an issue in the UK with the trade of black market vapes as a direct result of a lack of funding to enforce the existing rules. There is next-to-no deterrent, currently, for rogue retailers peddling illegal products - and this includes selling them to children.

Since enforcement agencies are already struggling to get a grip on the black market, this taxation will likely drive adult vapers who currently purchase their vape juice legitimately straight into the open arms of these unscrupulous vendors.

The cost to the NHS

Smoking causes many, many health issues - lung cancer, COPD, heart disease, and stroke being the most widely associated. Treating these conditions is highly costly; smoking-related diseases are estimated to cost the NHS approximately £2.6 billion annually.

While vaping still carries some risks, it’s widely considered to be substantially less harmful than smoking. Public Health England estimates vaping to be at least 95% less harmful than smoking, so the reduction in tobacco-related illnesses could lead to significant NHS savings.

Though precise figures are difficult to pinpoint, it’s suggested that the NHS could save more than £500m per year in future healthcare costs if adult smokers continue switching to vaping. 

What’s next?

As full members of UKVIA, we are actively lobbying the government to approve the introduction of a Vape Retailer Licensing scheme. We strongly believe this scheme will do far more than taxation to crack down on youth vaping and fund the enforcement of existing regulations.

The good news is that we have just received positive feedback from this new government, which is now prepared to discuss the scheme with us and flesh it out.

In a letter this week to Health Secretary Wes Streeting, UKVIA said.

“On behalf of the UK Vaping Industry Association (UKVIA), we would like to thank you and the Health and Social Care ministerial team for announcing that the soon-to-be-reintroduced Tobacco and Vapes Bill will “include powers to introduce a licensing scheme for retailers to sell tobacco, vape and nicotine products in England, Wales, and Northern Ireland.” 

As you will be aware, the legitimate vaping industry has long advocated for the creation of a licensing scheme for retailers and distributors, and we are delighted that vape licensing is now firmly on the policy agenda. This development will enable youth and illicit vaping to be addressed, allowing the industry’s focus to remain on supporting adult smokers in quitting.”

We're here to help you quit smoking for good.

At Vape UK, we pride ourselves on being responsible vaping advocates. We keep up to date with all the latest news and studies, only supply high-quality TPD-compliant vaping products, and always offer helpful and honest advice about vaping. Please get in touch if you have any queries about quitting smoking.