Spring Budget 2024: New vaping products duty proposed from 1 October 2026

The vaping products duty is a proposed new fiscal measure designed to address various concerns associated with vaping, including public health and market regulation. A consultation document was published as part of the Spring Budget measures on 6 March 2024, with a due date for responses of 29 May 2024.

The proposed duty targets the reduction of vaping among young people and non-smokers, encourages the use of products with lower nicotine content, and aims to generate revenue for public services like the NHS.

The proposed duty applies to all vaping liquids, categorized under a tiered rate structure based on nicotine content.  This approach encourages manufacturers to reduce nicotine levels in their products and consumers to opt for lower nicotine or nicotine-free alternatives.  The proposed rates are:

• £1.00 per 10ml for nicotine-free liquids,
• £2.00 per 10ml for liquids with nicotine per ml content that is up to an average cigarette's strength, and
• £3.00 per 10ml for liquids with higher nicotine content per ml.

Manufacturers and importers will need to register with HMRC and comply with the duty's regulations, including:

• registration of UK production, processing and packing facilities;
• registration of storage premises for duty suspended goods;
• filing monthly returns and making payments for UK producers; and
• declaration and payment at the point of importation via a customs declaration for importers, or a need to enter into an arrangement to defer the payment of excise duty or place the products into an excise duty suspension arrangement.

The duty's design aims to be proportionate, minimising administrative burdens while ensuring compliance and effective enforcement. Affected entities should prepare for the duty's impact on product pricing and market strategies, as the increased costs will likely influence consumer preferences and demand.

It is proposed that the penalties for the new duty would align with those that already apply across existing regimes, including penalties for:

• manufacturing in unregistered premises
• holding or supplying duty unpaid goods without approval
• late filing of returns
• late payment or non-payment of duty
• failure to provide information
• failure to maintain records
• submitting inaccurate records

Civil and criminal powers will be available to HMRC to tackle non-compliance and fraudulent evasion of duty.  HMRC are also considering as part of the consultation whether or not a track and trace system, similar to that used for tobacco products, should be introduced.  This would be aimed at making it easier to detect genuine product that has been diverted into the illicit market and make it more difficult for illicit product to enter the legitimate market.

The duty is expected to influence consumer behaviour, disincentivising the use of vaping products by making vaping and higher nicotine products more expensive. This may lead to a shift towards lower nicotine or nicotine-free products, aligning with public health objectives.  Tobacco duty will also be increased from 1 October 2026 so that there is still a financial incentive to choose vaping over smoking.

Postal imports of vaping liquids will be subject to the same rates of duty as applies for businesses importing bulk products.  The parcel or courier company is responsible for taking the goods through UK customs.  Consumers may have to pay the vaping products duty and any VAT or customs duty before receiving their goods.

According to the consultation document, nearly 50 countries globally have introduced taxes on vaping products that target liquid as the tax base.  This includes 18 European countries, Norway, Canada and several US states. Each territory has its own domestic tax with different structure and methods of tax, which means affected businesses will have to understand and apply the different rules in each territory.

The proposed rates for the UK's duty are progressive and similar to those in countries with a nicotine strength-based system, like Sweden and Denmark.  It differs from some countries that for example apply a universal rate to all nicotine-containing products.

UK producers, importers and couriers will be affected by the proposed new duty.  We can help affected business to understand the current proposals, respond to consultations to ensure that the proposals are operable for the industry, and prepare for registration and implementation.

Our specialist excise duty and customs teams can help you with registering production, processing and packing facilities, along with obtaining approval to operate an excise warehouse for duty suspension purposes and then complying with the requirements.