The government has announced a series of significant changes to duties affecting gambling, soft drinks, tobacco, vaping, and alcohol. Here’s what you need to know.
Gambling Duties: A New Era for Bingo and Online Gaming
In a move to support the leisure sector, bingo duty will be abolished from its current 10% rate, effective 1 April 2026. This simplification removes a specific tax burden for leisure and gaming businesses, particularly those operating high-street bingo halls or online bingo platforms. The change is expected to improve gross margins and may encourage operators to reinvest savings into prize funds or facility upgrades, driving increased footfall. Businesses should review pricing models and financial forecasts for FY26/27 to account for this cost removal.
However, remote gaming duty on online casino-style games will rise sharply from 21% to 40%. This increase targets the fast-growing online gambling market, and many operators are likely to adjust prices, resulting in lower payouts or worse odds for players.
Soft Drinks Levy: Milk-Based Drinks Now Included
The “sugar tax” is being widened to include pre-packaged milk-based and milk-alternative drinks, ending their historic exemption. From 1 January 2028, products like supermarket milkshakes, sweetened yoghurt drinks, and ready-to-drink coffees will be taxed if they contain added sugar. Open-top drinks made in cafés and restaurants remain exempt.
Additionally, the taxable sugar threshold will drop from 5g to 4.5g per 100ml, meaning many drinks previously reformulated to avoid the levy will now be taxed unless they reformulate again. This is a major compliance shift for retail and manufacturing businesses in the beverage market. Producers have a three-year window to reformulate recipes below the new threshold or face a price disadvantage. Standard soft drinks between 4.5g and 5g of sugar will also now incur liability unless adjusted.
Tobacco and Vaping Duty: New Rates and Vaping Products Duty
From 1 October 2026, a new Vaping Products Duty (VPD) will be introduced, alongside a one-off increase to tobacco duties to maintain the price differential between vaping and tobacco products. The increases are as follows:
- Tobacco duty: £2.20 per 100 cigarettes
- Other tobacco products: £2.20 per 50g
- Vaping liquids: £2.20 per 10ml
These changes aim to preserve the incentive to choose vaping over smoking, with vaping considered a healthier alternative. Full details of the rates can be found on the GOV.UK Tobacco Duty Rates page.
Tobacco Duty Rates
From 26 November 2025:
- Cigarettes: £353.50 per 1,000 cigarettes plus 16.5% of retail price (additional 57p per packet of 20)
- Cigars: £440.93 per kg (additional 28p per 10g)
- Hand rolling tobacco: £503.80 per kg (additional 97p per 30g packet)
- Other smoking/chewing tobacco: £193.87 per kg (additional 37p per 30g packet)
- Tobacco for heating: £363.36 per kg (additional 14p per 6g pack)
From 1 October 2026:
- Cigarettes: £394.09 per 1,000 cigarettes plus 16.5% of retail price (additional £1.21 per packet of 20)
- Cigars: £508.12 per kg (additional 81p per 10g)
- Hand rolling tobacco: £574.30 per kg (additional £2.54 per 30g packet)
- Other smoking/chewing tobacco: £248.07 per kg (additional £1.95 per 30g packet)
- Tobacco for heating: £426.47 per kg (additional 45p per 6g pack).
Minimum Excise Duty for Cigarettes
The Minimum Excise Duty sets the lowest level of duty payable on cigarettes. If the calculated duty is lower than the minimum, the minimum applies:
From 30 October 2024: £446.67 per 1,000 cigarettes
From 26 November 2025: £471.93 per 1,000 cigarettes
From 1 October 2026: £518.75 per 1,000 cigarettes.
Alcohol Duty: RPI Increase and Small Producer Relief
All alcohol duty rates will be uprated in line with the Retail Price Index (RPI) at 3.66%. The government will also increase the cash discount for small producers to maintain the value of Small Producer Relief (SPR), which provides lower duty rates for small producers making products below 8.5% ABV, not produced under licence, and made on premises producing less than 4,500 hectolitres of pure alcohol per year.
Duty Rates
Schedule 7:
- Alcoholic products < 3.5% ABV: £9.96 per litre
- Still cider 3.5%–8.5% ABV: £10.39 per litre
- Sparkling cider 3.5%–5.5% ABV: £10.39 per litre
- Beer 3.5%–8.5% ABV: £22.58 per litre
- Spirits, wine, other fermented products 3.5%–8.5% ABV: £26.61 per litre
- All alcoholic products 8.5%–22% ABV: £30.62 per litre
- All alcoholic products > 22% ABV: £33.99 per litre
Schedule 8 (Reduced Rates):
- Draught alcoholic products < 3.5% ABV: £8.58 per litre
- Draught still cider 3.5%–8.5% ABV: £8.95 per litre
- Draught sparkling cider 3.5%–5.5% ABV: £8.95 per litre
- Draught beer, spirits, wine, other fermented products 3.5%–8.5% ABV: £19.45 per litre
- Sparkling cider 5.5%–8.5% ABV: £19.45 per litre.
These changes represent a major shift in the tax landscape for leisure, beverage, tobacco, and alcohol sectors. Businesses should act now to review their pricing, product formulations, and financial planning to stay ahead of the curve.
The information provided in this guide is intended as a general overview to help readers understand the key measures introduced in the UK Budget 2025. It does not claim to be exhaustive and should not be relied upon as a substitute for tailored professional advice. If you have any questions or require specific guidance, please
speak to one of our experts.
