UK Vape Tax Increase: Expectations and Implications

TL;DR

• The UK government has finalised the Vaping Products Duty, which will start on 1st October 2026.

• A public consultation process raised concerns about the consequences of a duty based on nicotine content.

• A flat rate based on e-liquid volume will be implemented instead, set at £2.20 per 10ml.

• This excise duty will be chargeable at points of manufacture and import.

• This places the UK Vaping Products Duty 10th out of 27 European countries who tax vaping liquids.

The government took a heavy swing at vaping in the 2024 Spring Budget announcement earlier this year. UK Chancellor Jeremy Hunt introduced a new Tobacco and Vapes Bill that will ban disposables on 1st April 2025. This came as a blow if not an unsurprising one, but the unveiling of a massive tax increase on all e-liquids left the vaping community stunned.

This levy is aimed at an industry that is endorsed by health professionals⁽¹⁾ as a much safer alternative to smoking and seems ill-timed given the current cost of living crisis and the government's plan to phase out smoking entirely.

Add to this the looming discussions regarding potential flavour and packaging restrictions, and it seems that vaping is being disproportionately and irrationally undermined, considering it is one of the few industries that provides a harm and cost reduction benefit to society.

Compounding the confusion are mixed signals from the government in the form of their nationwide ‘Swap to Stop’ campaign, aimed at encouraging vaping, whilst providing no definitive plan to tackle the widespread black market - an industry which is overwhelmingly responsible for the rise in youth vaping, and which stands to benefit the most from the new vape tax.

Vaping is regarded as the most successful nicotine replacement therapy available, responsible for helping over 2.7m smokers in the UK successfully quit their habit.⁽²⁾ The low cost of owning and maintaining a vape kit is one of the biggest motivators to get smokers to make the switch.

Whilst disposables are by far the most popular device among those looking to quit, you get the biggest savings with a refillable vape kit and bottles of e-liquid - and this is where the new vaping levy is going to hit hardest.

The new UK vape tax followed a lengthy consultation process with members of the public and industry, which seems to have had little effect on their decision making, as it is adult vapers who are now being punished for choosing to live a healthier lifestyle.

Join us as we unpack the implications for vaping after the latest tax budget, explain when the Vaping Products Duty (VPD) starts, why e-liquids are being taxed and what this will mean for your wallet.

Table of contents

1. Why is there a new tax on vaping?

The new vaping duty forms part of the government’s ambition to tackle youth vaping and former Prime Minister Rishi Sunak's vision to create a ‘smokefree generation’. It followed a consultation between the health professionals and members of the public in 2023, which saw over 70% of respondents say that they thought an increase would reduce youth vaping.

The new legislation introduces a ban on disposable vapes and increases the cost of e-liquids to prevent those under 18 from taking up vaping. All vaping products are already subject to a 20% rate of VAT, and the additional levy is known as a ‘sin tax’. These are applied to products like alcohol, tobacco and sugar, that are seen as potentially harmful to consumers.

Whilst the number of minors who smoke in the UK is falling, the vaping rates among minors is on the rise. According to ASH, there has been a steady increase in the number of young people vaping over the past 3 years. A recent survey in 2023, revealed that 20.5% of children aged 11-17 said they had tried vaping at least once, which was up from 15.7% the previous year. The number of regular users is much lower but did increase from 2.0% in 2021 to 3.9% in 2023.(³⁾

Disposable vapes are the most popular choice among school children, accounting for 69% of the most commonly used devices. In comparison, refillable and prefilled vape kits affected by the new vape duty account for only 11% and 12% of use respectively. Vape flavours have also been blamed for increasing the appeal to children, and potential flavour restrictions are also being discussed. The biggest impact of the increased cost of vaping products will be on the wallets of adult vapers who have chosen to stop smoking.

Director of Vape Superstore, Ed Swain, shared his concerns: 'For many, vaping serves as a crucial tool in transitioning away from combustible tobacco products, offering a safer alternative. The imposition of a tax could price out individuals who rely on vaping as a harm reduction method. The current proposal would see some bottles of e-liquid double in price which will inevitably deter users from continuing their journey towards a smoke free life.'

2. How much is the UK vape tax going up?

The new vape duty will be introduced on 1st October 2026, and introduces a charge of £2.20 per 10ml of e-liquid. This scraps their previous plan to tax vape juice based on nicotine content and focuses soley on the volume of liquid instead.

This means that even zero nicotine e-liquid will be affected by the new duty increase.

• All 10ml vape liquids will increase by £2.20. This doubles the average cost of a 10ml vape juice to over £5 per bottle.

• A 100ml shortfill will increase by £22 and a 50ml shortfill by £11.

• On top of that shortfill users will have to pay an additional £2.20 extra for each of their nic shots.

• The implication of this is that a 100ml shortfill with nic shots could now cost over £40 per bottle.

Initially the duty was going to be based on the nicotine content, but respondents to the goverments industry consultation, were worried that vapers may try to save money by choosing a lower nicotine content than meets their needs. This could risk them returning to smoking when their cravings were not satisfied. So instead, the government decided that ALL e-liquids will be taxed the same flat rate of £2.20 per 10ml volume.

In a staggering twist of irony, highlighting how little thought went into this process, the new tax, aimed at reducing youth vaping and waste, will heavily penalise the most sustainable and least youth-appealing form of vaping - shortfills - which will face an eye watering 147% cost increase per bottle, whilst leaving the least environmentally friendly and most youth-accessible form of refillable vaping - pre-filled pods - with a only a minor 7% cost increase per pack.

3. How much will e-liquid cost in 2026?

A positive takeaway is the government's increase of the tax on tobacco by £2.20 per 100 cigarettes, they say this is to ensure that the cost of vaping remains as a financial incentive.

Following the tax hike, vaping will still be more than three times cheaper than smoking.

The UK is not alone when it comes to vaping duties. Nearly every country in Europe taxes vaping liquids, and the new vape tax will place the UK 10th out of 27 for highest tax rates.

4. Expectations from the UK vape tax increase

The additional tax on vaping products is set to generate £445 million in revenue by 2028/9, which the government claims will be invested in the NHS and Trading Standards to help combat the black market.

The government hopes that the increase in the cost of vape products will reduce their appeal to teenagers who lack disposable income and, in conjunction with the disposable vapes ban, the expectation is that rates of underage vaping will decrease.

Concerns from the vaping industry centre around the financial impact that will be felt right through the entire supply chain from the manufacturer to the consumer.

Compounding this issue is the failure of the Tobacco and Vapes Bill to deliver any constructive measures to curb the proliferation of black market vape goods which are guaranteed to blossom as consumers seek out cheaper alternatives, this could potentially mean further loss of earnings for vaping wholesalers and retailers.

5. Will the Tax on Vapes Work?

The argument that the vaping tax will act as a deterrent doesn't make a distinction as to where children are getting their vapes from. It doesn't address cornershop vendors involved in the trade of black market vapes since, the primary source for most devices obtained by minors.

A 2023 survey by Action on Smoking and Health (ASH) revealed that 48% of children obtained their first vape product from a shop.⁽⁴⁾ Cornershops and so-called 'American Candy Stores' litter the high street, unscrupulously selling unregistered vape products often with no qualms as to who they are selling to.

Director of Vape Superstore, Ed Swain had this to say, 'The Government needs to get a handle on what the real issues are. The disposable ban always felt inevitable, but this is the result of a lack of funding provided to enforce the illicit sale and distribution of illegal products. To suggest that the money earned from this tax will be used to enforce such rogue sellers is disingenuous. The tax is a statement piece of legislation which will only serve to push back the public health progress made through vaping.'

The UK Vaping Industry Association (UKVIA) has been calling for a Vape Industry Licensing Scheme to be implemented to combat the surge of illicit market vaping products. It would be self funded and would pave the way for underground vendors to be traced and stopped from selling illegal vape products and introduce much higher penalties of up to £10,000 for underage selling.

Enforcement agencies cannot currently get a grip on the sale of illicit vapes and the only people affected by the price increase will be adult vapers and the entire legitimate vaping supply chain.⁽⁵⁾

The increase in the costs of e-liquid could see the average vaper spending an additional £20 - £30 a month on vaping. Further costs to people's monthly spending risk driving adult vapers away from legitimate sources and straight into the hands of an eager black market.

A Vape Juice Self Assessment...?

Another concern raised during the industry consultation was that the new vape duty would drive consumers to begin making their own vape juice at home, using unhygienic DIY methods.

In response, the government stated, "All vaping products will be within the scope of the duty including those produced at home from base ingredients, such as propylene glycol, vegetable glycerin, flavourings and nicotine. The new vape tax would be implemented at the point of manufacture." (⁶⁾

The government did not mention how they were planning to monitor and tax potentially millions of vapers making e-liquid in their own kitchens.

6. How will the vaping tax increase affect the economy?

The UK vaping market not only supports the economy but also contributes to easing the burden on health services by reducing the number of smokers and therefore, the amount of smoking-related illnesses.

In 2023 the vaping industry generated £2.8bn in total revenue, it provides almost 18,000 full-time jobs and is one of the rare industries contributing to economic value and harm reduction - not something every retail sector can say. Thanks to the vaping industry the NHS saved over £300m in 2019, on top of £310m in tax in 2021.⁽⁷⁾

The tax on vapes would hit consumer budgets and businesses, many of whom may struggle to find the resources to pay for the new increase in import costs.

The UK vape tax increase is an excise tax, which means that it begins at the manufacturer level. This could have a severe impact on smaller vape retailers, who may be at risk of going out of business if they lack the funds necessary to pay for the increased wholesale costs. Higher costs could affect pay, lead to downsizing and potential job losses in the sector and the forced closure of smaller enterprises unable to take the financial hit.

In short, small vape shops may be priced out of business by the tax increase on e-liquids. This may incentivise them to source e-liquids from the black market.

7. Conclusion

Making vaping more expensive will negatively impact an industry that provides thousands of jobs and gives adult smokers a much healthier alternative, backed by the government and the NHS. It also fails to properly address the proliferation of black market products, which are the primary source of vape products for youth.

A higher tax on vape liquids risks reducing the appeal of vaping to adults, potentially dissuading smokers from making the switch and increasing the burden on health services. Although the government says that it has offset this effect with a one-off increase in tobacco duty, existing vapers could see their costs go up by more than a third, even as vaping remains cheaper than smoking.

Promises to use additional revenue to fund Trading Standards feel vague, lacking concrete planning and action, such as implementing an effective Vape Industry Licensing Scheme. The legitimate vaping industry has been advocating for this scheme for years, as it would make monitoring and enforcement significantly more effective.

If millions of vapers begin turning to DIY e-liquid manufacture, the government will need to find a way to track and enforce the new vape duty on homemade vape juice - that or tax the base ingredients. This seems unlikely, however, given the government's lack of control over the current black market.