Chancellor Spares Smokers and Vapers from Tax Hikes, but Vape Shops Lose Relief

Chancellor John Healey has announced that smokers and vapers will not face additional tax increases in the latest budget, coming weeks after a significant duty rise on these products. However, vape shops will lose their business rates relief under the new measures.

In his inaugural budget, branded as "a Budget for the working people of Britain," Healey stated his intention to withdraw business rates relief from vape shops and adult gaming centers. This move is intended to fund an increase in the threshold for small business rates from £12,000 to £18,000. The Treasury indicated that this reallocation of funds would provide financial breathing room for other high street businesses, such as pubs, and contribute to the revitalization of town centers.

This decision follows an earlier pledge by Prime Minister Andy Burnham to curb the proliferation of vape shops in struggling town centers, citing concerns about their use as fronts for illegal activities. The announcement also comes shortly after a hike in tobacco taxes and the implementation of a Vaping Products Duty on October 1.

Previously, the Vaping Products Duty, set at £2.20 per 10ml of liquid, impacted even zero-nicotine formulas, leading to a doubling in the price of some vape liquids. This levy, which can amount to an extra £600 annually for a heavy daily user, also affected cheaper products favored by lower-income vapers. A similar £2.20 increase was applied to cigarette smokers and other tobacco users, in addition to a duty increase of two percentage points above the rate of inflation. The UK Vaping Industry Association criticized the vaping tax as a "tax on public health," arguing that it increased prices significantly and could deter adults from quitting smoking.

Tobacco duty rates were raised by the retail price index plus an additional two percentage points on October 1, with a further £2.20 levy per 100 cigarettes or 50g of tobacco. This resulted in an approximate £1.21 increase for a pack of 20 cigarettes and £2.54 for a 30g packet of rolling tobacco. Heating tobacco products also saw a duty increase of nearly a quarter since October 2024.

While manufacturers and importers are responsible for paying these duties, the costs are often passed on to consumers. Retailers have a six-month grace period to sell existing stock at pre-duty prices, with a gradual price increase expected. Starting April 1, all vape products will require an HMRC stamp to verify their legitimacy and combat illicit trade.

The government has also been consulting on potential bans for vape firms using brightly colored packaging and aggressive marketing tactics. Furthermore, regulations are being tightened to prevent underage sales, with new restrictions on selling nicotine pouches, zero-nicotine vape liquids, and vape components to individuals under 18. The existing ban on cigarette sales for individuals born after January 1, 2009, which effectively creates a lifetime ban, is also being maintained.

In other budget announcements, 20 million households will receive a £100 energy bill handout this winter. The budget also includes a three percent corporation tax surcharge on banks to fund a £5.5 billion increase in benefits. Standing charges on gas bills are set to be abolished, and the zero percent VAT rate on electricity bills will be extended to July. However, these measures may be offset by a projected 27 percent increase in the energy cap. The Office for Budget Responsibility forecasts a slowdown in economic growth, with expansion predicted at 1.2 percent this year and 1 percent next year. Reductions in tariffs on imported goods like marmalade and gherkins were criticized as minimal, with estimates suggesting only a 40p saving on the average weekly shop.