Policy paper

Changes to tobacco duty rates from 30 October 2024

Published 30 October 2024

Who is likely to be affected

Manufacturers, importers, distributors, retailers and consumers of tobacco products. Tobacco products include cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco, tobacco for heating and herbal smoking products.

General description of the measure

This measure sets out how tobacco duty rates will increase on 30 October 2024.

Policy objective

The government is committed to maintaining high tobacco duty rates which is an established tool to reduce smoking prevalence and ensure that tobacco duties continue to contribute to government revenues. Consequently, the government has decided to maintain the tobacco duty escalator, which increases duty in line with the Retail Price Index (RPI) plus 2% at each annual Budget. There will also be an additional increase to the duty rate on hand-rolling tobacco above the duty escalator to narrow the gap between hand-rolling tobacco and cigarette duty rates.

Background to the measure

As announced at the Autumn Budget 2024, the duty rate on all tobacco products will increase by the tobacco duty escalator of 2% above RPI inflation. The duty rate for hand-rolling tobacco will rise by an additional 10%, to 12% above RPI inflation. These changes will apply at 6pm on 30 October 2024.

Detailed proposal

Operative date

The new tobacco duty rates will have effect at 6pm on 30 October 2024.

Current law

The table of tobacco duty rates is in Schedule 1 to the Tobacco Products Duty Act 1979 (TPDA).

Proposed revisions

Legislation will be introduced in Finance Bill 2024-25 to increase the tobacco duty rates. The legislation will amend Schedule 1 to the TPDA and makes consequential changes to the simplified calculations contained within the Travellers’ Allowances Order 1994.

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
+ 40	+ 85	+ 105	+ 135	+ 160	+ 180

These figures are set out in table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.

Economic impact

This measure is not expected to have any significant macroeconomic impact.

Impact on individuals, households and families

This measure will impact on individuals who smoke by increasing the price of tobacco products. Heavy smokers will face the highest burden from this measure.

In response to higher prices, individuals generally choose to consume less. For all tobacco types, evidence shows a significant negative relationship between price and quantities demanded. From 2019 to 2023, the tobacco escalator coincided with a reduction in estimated smoking prevalence from 14.1% to 11.9% of people aged 18 or over. Over the same period, estimated vaping prevalence has increased from 5.7% to 9.8% of people aged 16 plus. As a result of this measure, we expect some consumers to switch from more expensive to cheaper tobacco products and that some may reduce tobacco consumption (partly by substituting to vaping). Some consumers might also engage in cross-border shopping and purchase from the illicit tobacco market. HMRC will monitor and respond to any potential shift in illicit consumption as part of its strategy to combat tobacco fraud.

The measure is not expected to impact on family formation, stability, or breakdown.

Customer experience is expected to stay broadly the same as this measure only increases the price of tobacco products.

Equalities impacts

Tobacco rate changes apply regardless of an individual’s protected characteristics, and equality impacts will reflect the composition of the smoking population. Smokers are represented in each of the groups sharing protected characteristics. This measure is expected to have both positive and negative impacts on protected groups where smoking is more prevalent. People will experience a negative impact as a result of this measure as the cost of tobacco products will increase, however cost increases can disincentivise smoking resulting in a beneficial impact to health and finances.

Men (13.7%) are more likely to smoke than women (10.1%). People aged 25 to 34 have the highest proportion of smokers (14.0%), whereas those aged over 65 have the lowest proportion of smokers (8.2%). People from a Mixed or other ethnic background (14.8%) are more likely to smoke, while people from Asian (6.6%), Black (6.7%) and Chinese (5.6%), ethnic groups are less likely to smoke.

People living in the most deprived areas of England are more than 3 times more likely to smoke than those living in the least deprived areas. Smoking is a significant driver of ill-health and disability, and smoking likelihood is higher in the disabled population. Those with mental health conditions are more likely to smoke than those without, and smoking prevalence increases with the severity of illness. Smoking prevalence is higher among those identifying as having no religion than those who identified as Muslim, Christian, Hindu, Jewish, or Sikh. The proportion of smokers is also higher in the LGBTQ+ community compared to those who identify as heterosexual or straight.

Impact on business including civil society organisations

This measure is expected to have a negligible administrative impact on fewer than 30 manufacturers and importers. They will face an increase in tobacco duty rates that they are likely to pass on to consumers.

There will be a negligible one-off cost to these businesses of familiarisation and amending systems to reflect the new rates. It is not expected there will be any continuing costs.

Customer experience is expected to stay broadly the same as this measure does not present a significant change for tobacco manufacturers and importers.

There is no impact on civil society organisations.

Operational impact (£ million) (HMRC or other) 

HMRC will need to make changes to IT systems to deliver this change, at an estimated cost of £20,000.

Other impacts

Health impact assessment: any reduction in smoking prevalence will have a positive impact on health and reduce the cost to the NHS of smoking-related illness.

There may be reductions in other costs that arise from tobacco use. These costs include losses in productivity from smoking breaks and ill-health absences, the cost of cleaning up cigarette butts, the cost of smoking-related house fires and the loss in economic output from people who die from diseases related to smoking or exposure to second-hand smoke.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax receipts.

Further advice

If you have any questions about this change, contact the General Enquiries Helpline by telephone: 0300 200 3700.