Ministers consider new vaping tax at Budget next week

The government is considering announcing a new tax on vapes at the Budget next week.

Currently, vaping products are subject to VAT – but unlike tobacco, they are not also subject to a separate levy.

Tobacco duty could also increase at the Budget, to ensure that vaping remains cheaper.

Ministers fear that the relatively cheap cost of vaping means that the products are more accessible for young people and non-smokers.

The government first said it was considering a vaping levy at November’s King’s Speech, citing a “significant differential” with tax on tobacco.

According to the Times, which first reported the story, the new duty will be levied on the liquid in vapes, with higher tax rates for products with more nicotine.

Treasury analysis suggests the new vaping tax, along with the rise in tobacco duty, could eventually raise around £500m a year.

The separate tax on tobacco products was raised by 2% more than inflation last year as part of the Autumn Statement.

Several European countries have e-cigarette taxes, with the European Commission planning to introduce a minimum level across the EU.

It comes after plans were announced last month to deliver a UK-wide ban on disposable vapes, alongside restrictions on flavours and how they can be packaged.

UK government ministers, who are responsible for delivering the ban in England, say they hope to pass the relevant legislation before the next election.

The ban would then come into force in early 2025, with retailers given six months to make the changes once the timing is confirmed.

The government also plans to increase fines for retailers that sell vapes to under-18s, which is illegal.

Next week’s Budget will see the government unveil its tax and spending plans for the year ahead amid the backdrop of sluggish economic growth.

Chancellor Jeremy Hunt has hinted he would like to lower taxes, in what could be the last Budget before a general election.

But the Institute of Fiscal Studies, a think-tank, has said the UK is in a “poor position” to do so.

It noted that at the Autumn Statement, the chancellor was “only just” on course to meet the government’s rule that official forecasts should show debt falling as a share of national income in five years’ time.