The Tax on Vaping: a cynical cash grab that punishes the poor

In an economically illiterate move that will no doubt have the tobacco industry jumping for joy, UK Chancellor Jeremy Hunt has announced a severe, and extremely complicated, tax on vaping.

Just when we hoped the government had attacked the vaping industry enough this year, Chancellor Jeremy Hunt announced a tax on vaping in his Spring Budget, and rubbed salt into the very fresh wounds.

The proposed tax is not only one of the most severe in the world (doubling the cost of vaping for many), it's also one of the most complicated and difficult to enforce.

Combined with the upcoming ban on disposable vapes, it would seem that this government wants to keep people smoking. 

The vast majority of vapers are ex-smokers; they did what was asked of them, and quit smoking. Now the government is about to punish them for it. Maybe we were naive, but we expected far better from a former health minister!

Let’s take a look at 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 tax rate on any vaping products, which means that vapes are taxed at the standard VAT rate of 20%.

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

Why is a tax on vaping being introduced?

One of the reasons cited by the Chancellor for a duty on vaping is to raise revenue to support public services. The proposed excise tax would generate £120m in 2026-7, rising to £445m by 2028-9.

Another of his reasons is to tackle the so-called ‘pocket money prices’ that attract minors to vaping, and to deter non-smokers from taking up vaping in the first place.

Finally, an excise duty at the point of manufacture means, in principle, that there should be more eyes on imported products from Border Force and HMRC. If that is actually feasible with the current resource shortages across UK enforcement agencies, then it could result in more illicit vapes being seized at our borders.

When will the tax on vaping be introduced?

The plan is to introduce the new vape tax on 1st October 2026, following a lengthy consultation process. 

The fact that this is over two years away (when the Conservatives aren’t even likely to be in power) tells us that this was a last minute, un-thought through, cynical cash grab from a government that is using the vaping culture war to desperately win support.

The proposal is ridiculously complicated and unenforceable in its current form. The consultation process will undoubtedly uncover these challenges and complexities, and we would imagine/hope that many changes will be made before it comes into effect. 

How much tax will be added to vape products?

This is where it really gets ridiculous! Jeremy Hunt proposes that the nicotine content of e-liquid be the subject of the tax. The higher the nicotine content, the higher the tax. Zero nicotine e-liquids don’t escape this new taxation though, albeit at the lowest level.

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

Let’s lay out what this looks like in reality:

Smokefree by 2030???

This would make the UK one of the most expensive countries in the world to be a vaper. Considering we used to be seen as progressive leaders in harm-reduction, this is a massive back-step.

When you first decide to swap smoking for vaping, you need the highest nicotine strengths in order to keep the cravings at bay, and have the most chance of success. 

If you’re an average smoker, you’ll likely get through a 10ml bottle of high strength e-liquid every 2-3 days. This new tax would mean that vaping would cost you an extra £60-£80 per month. 

That doesn’t sound like a policy that is coming from a government insisting they want the UK to be Smokefree by 2030!

Tobacco products duty rates

Considering this is a new taxation on vaping products, the starting point represents an appalling percentage increase. Tobacco duty on cigarettes generally increases with each budget, but never by such eye-watering amounts.

For example, in October 2021 the Minimum Excise Duty on cigarettes was £6.96 per pack of 20; this increased to £7.87 in March 2023, and then to £8.46 in November 2023. In the budget, Jeremy Hunt announced another 40p will be added to the duty from October 2026. That's a 21% increase in tobacco duty over a 5 year period.

E-liquid duty rates

Compare that to the increase we're facing on e-liquid. If you work from a pre-duty base price of £2.50 for a 10ml bottle, this is what the price hike looks like in percentage terms: 

• Nicotine free e-liquid increases to £3.70 - +48%
• Up to 11mg nicotine increases to £4.90 - +95%
• 11-20mg nicotine increases to £6.10 - +143%

Also, nic shots for short fills will jump from £1 to £4.60 - a staggering 360% increase!

How will the vape industry be affected by a tax on vaping?

Increased taxes will push up costs to consumers, and reduce the demand for vaping products. In no uncertain terms, this will price the smaller retailers in the vaping industry out of the market very quickly - which is a crying shame. 

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

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.

A tax on vaping would mean that only the established brands would have a chance at riding out the storm. This will reduce market competition, and reduce consumer choice, thereby leading to further increase in costs. 

The tobacco industry would be the biggest winners

With these astounding profit margins, tobacco manufacturers can more than afford to swallow a new tax on vaping, without needing to increase their prices. 

Soon, we might find that 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. They must think all their Christmases have come at once!

What’s next and what can be done?

As mentioned above, this is just the beginning. The government is holding an open consultation to gather feedback on the design and implementation of this new UK-wide Vaping Products Duty.

As full members of UKVIA, we are currently lobbying the government to approve the introduction of a Vape Retailer Licensing scheme, which we strongly believe will do far more to crack down on youth vaping, as well as fund the enforcement of existing regulations.

In the meantime, we’ve got the ban on disposables to prepare for. The Tobacco and Vapes Bill is expected to be presented to parliament for a second reading in April, so we’ll be working extra hard to fight against both of these attacks on people trying to quit smoking.

We might be down, but we’re in no way out. We’re going to come out swinging!

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 of the latest news and studies; we supply high quality TPD compliant vaping products; and we are always on hand to offer helpful and honest advice about vaping. Please get in touch if you have any questions for our team.