Britain eyes new tax on vaping from 2026

LONDON: British finance minister Jeremy Hunt said he is planning to introduce an extra tax on vaping products from October 2026, aiming to make the habit more expensive to deter non-smokers from taking it up.

Hunt said the government would introduce a one-off increase in tobacco duty at the same time to maintain the financial incentive to choose vaping over smoking.

“To discourage non-smokers from taking up vaping, we are today confirming the introduction of an excise duty on vaping products from October 2026 and publishing a consultation on its design,” Hunt said in his budget speech to parliament on Wednesday.

Many tobacco control advocates say vapes or e-cigarettes offer a way to reduce the death and disease caused by smoking. Others however point to health risks and concerns around a new generation of nicotine users.

Amid ever-stricter tobacco regulations and falling smoking rates in some markets, tobacco giants like British American Tobacco BATS.L hope vapes will become an increasingly important revenue stream.

Jefferies analyst Owen Bennett said the tax could benefit larger players like BAT by making it harder for smaller players to compete.

“BAT, especially given its highly profitable broader cigarette business, can afford to swallow the tax and not adjust prices,” he said, whereas it could make smaller firms’ products unviable.

BAT’s shares were flat at 1451 GMT, while rival Imperial Brand’s IMB.L were just over 1 per cent higher.

A sharp rise in vape usage by non-smokers and young people has forced the British government – a relative proponent of vaping as a way to reduce the harms of smoking – to consider tougher controls.

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Currently, most vapes are subject to value-added tax at the standard 20 per cent rate, but there is no extra levy applied.

Maggie Rae, president of the Epidemiology and Public Health Section of the Royal Society of Medicine, said any tax must be carefully considered to ensure it benefits public health.

“It’s imperative we ensure medicinal use of vapes continues to be encouraged, as smoking cessation remains the matter of greater importance,” she said.