Government Considers Imposing New Vaping Tax in Upcoming Budget, Increasing Tobacco Duty

The government is contemplating the introduction of a new tax on vaping products during the upcoming Budget session.

Presently, vaping items are subject to VAT, unlike tobacco, which incurs an additional levy.

There is a possibility of an increase in tobacco duty to maintain vaping as a more economical option.

Ministers are concerned that the affordability of vaping makes these products more accessible to young individuals and non-smokers.

The notion of a vaping levy was initially mentioned during November's King's Speech, highlighting a significant tax disparity with tobacco.

Reported by The Times, the proposed duty would be imposed on vape liquids, with higher rates for those with higher nicotine content.

Based on Treasury analysis, the new vaping tax, coupled with the hike in tobacco duty, could generate approximately £500m annually.

Last year, the separate tobacco tax increased by 2% above inflation, as outlined in the Autumn Statement.

Several European countries have implemented e-cigarette taxes, while the European Commission intends to establish a minimum level across the EU.

This development follows recent announcements of plans for a nationwide ban on disposable vapes, alongside regulations on flavors and packaging.

UK government ministers, tasked with enforcing the ban in England, aim to enact the necessary legislation before the upcoming election.

Once confirmed, the ban is expected to take effect in early 2025, allowing retailers six months to implement the required changes.

Additionally, the government intends to raise fines for retailers selling vapes to minors, which is unlawful.

The forthcoming Budget will reveal the government's fiscal policies for the forthcoming year amid sluggish economic growth.

Chancellor Jeremy Hunt has hinted at a desire to reduce taxes, possibly in the last Budget before a general election.

However, the Institute of Fiscal Studies has cautioned that the UK's fiscal position may not support such reductions, given the chancellor's proximity to meeting the government's debt reduction targets outlined in the Autumn Statement.