UK plans to increase taxes on e-cigarettes and tobacco

The plan to increase taxation on vaping products satisfies, for divergent reasons, both health professionals and tobacco manufacturers. The former see it as a way to reduce the accessibility of e-cigarettes for young people, the latter see it as a way to reduce local and Chinese competition.

After relaunching its plan to fight tobacco with a view to achieving a tobacco-free generation In 2030, the British government is now cracking down on vaping products. The surge in e-cigarette consumption among young people is the main reason. Among 11-17 year olds, experimentation with vaping has in fact increased from 15.8 % in 2022 to just over 20 % in 2023.

Taxation proportional to nicotine content

Alongside a proposed ban on single-use electronic cigarettes ('puffs'), the government has confirmed its intention to halt this increase by significantly increasing taxation on vaping products. E-liquids should be taxed according to their nicotine concentration: £2 (€2.34) per 10 ml of e-liquid when the content is that of a cigarette, £3 (€3.51) per 10 ml when the e-liquid exceeds this content. E-cigarettes without nicotine should be taxed at £1 (€1.17) per 10 ml of e-liquid. However, this new tax would not come into force until October 2026, after a consultation period. Taxation of tobacco products should also increase at the end of 2026, in order to maintain a significant price gap between these products and vaping products.

Tobacco tax increases have been significant in the UK, with the latest occurring in November 2023, and now bringing the price of a pack of cigarettes to £16 (€18). For the first time since they were introduced to the market a decade ago, vaping products will also see a change in their tax rate. As teenagers and young adults are very sensitive to price, this measure is clearly intended to discourage them from vaping products, a method that has proven effective for tobacco products.

Deborah Arnott, director of Action on Smoking and Health (ASH UK), said the tax would help stem the tide "The tsunami of illegal e-cigarettes flooding the market"[1]She believes that the price of e-cigarettes should remain lower than that of tobacco products, in order to encourage smokers to quit using vaping products.

Vaping industry takes hit

John Dunne, chief executive of the UK Vaping Industry Association (UKVIA), lamented the move and expressed concern for less affluent vapers – one of the arguments usually put forward by tobacco companies to oppose tax increases.

The announcement of this tax increase resulted in a fall in the stock market share of independent e-cigarette producers, as well as Supreme (-15 %), which produces the 88Vape brand and distributes the flagship Chinese puff brands ElfBar and Lost Mary. It also affected the share price of Imperial Brands (-6 %), the leader in the tobacco market in the United Kingdom.

A possible boon for cigarette manufacturers

British American Tobacco CEO Tadeu Marroco has spoken in favour of the proposed tax on vaping products and has joked about the issue by saying he loves regulation ("we love regulation")[2], while this multinational accumulates the violations and the convictions with regard to regulation.

Accustomed to the highly regulated tobacco market, where the small number of players facilitates commercial agreements between competitors, tobacco manufacturers are struggling to impose their cartridge-based electronic cigarettes ("pods") on the currently lightly regulated vaping market. According to Reuters, the British tax plan would make it easier for cigarette companies to absorb these increases by maintaining low prices on vaping products, something that small local producers would have more difficulty doing.[3]. In addition, the strengthening of regulations on vaping products is likely to primarily affect cheap disposable e-cigarettes from Chinese manufacturers, all factors which could thus limit competition.

Keywords: United Kingdom, taxation, vaping products, UK Vaping Industry Association, Imperial Brands, British American Tobacco

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[1] Ralph A, What will a vaping tax in budget mean for the tobacco industry?, The Times, published March 3, 2024, accessed March 6, 2024.

[2] Barnes O, Gross A, British American Tobacco chief embraces new UK vape tax, Financial Times, published March 6, 2024, accessed the same day.

[3] Young S, Rumney E, Britain plans new tax on vaping from 2026, Reuters, published March 6, 2024, accessed March 7, 2024.