Tobacco products duty rates 2018
Published 29 October 2018
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Who is likely to be affected
Manufacturers, importers, distributors, retailers and consumers of tobacco products.
Tobacco products include:
- cigarettes
- cigars
- chewing tobacco
- hand-rolling tobacco
- other smoking tobacco
- tobacco for heating
- herbal smoking products
General description of the measure
This measure sets out how tobacco duties will increase this year.
It also sets the rate for the new category of tobacco product, tobacco for heating, at the same rate applicable to hand rolling tobacco.
Policy objective
The government is committed to maintaining high tobacco duty rates as this is an established tool to reduce smoking prevalence and to ensure that tobacco duties continue to contribute to government revenues.
Background to the measure
This measure was announced at Budget 2018.
The duty rate on all tobacco products will continue to increase by 2% above Retail Price Index (RPI) inflation. It was also announced that hand-rolling tobacco will rise by an additional 1%, to 3% above RPI inflation this year.
The government published its consultation response to heated tobacco at Spring Statement 2018 and published draft legislation for the new category of tobacco for heating in July 2018.
Detailed proposal
Operative date
The new tobacco duty rates will have effect from 6pm on 29 October 2018 with the exception of tobacco for heating, which will take effect on 1 July 2019 after relevant amendments are made to secondary legislation.
Current law
The table of duty rates on tobacco products is in schedule 1 to the Tobacco Products Duty Act (TPDA) 1979.
Proposed revisions
Legislation will be introduced in Finance Bill 2018-19 to increase the rates of duty on tobacco products and set the rate of duty for tobacco for heating. The legislation will amend schedule 1 to the TPDA.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| - | +5 | +5 | +5 | +5 | +5 |
These figures are set out in Table 2.1 of Budget 2018 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2018.
Economic impact
This measure is not expected to have any significant economic impacts.
The costing includes a behavioural effect to account for the reduction in consumption of UK duty paid products resulting from higher prices.
Impact on individuals, households and families
Assuming duty increases are passed on to consumers, 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, some could choose to consume less, some could down-trade from more expensive to cheaper tobacco products, and others could engage in cross border shopping or purchase from the illicit tobacco market.
Any potential shift in consumption to the illicit market will be closely monitored by HMRC.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
Due to differences in tobacco consumption, any change to tobacco duties will have equalities impacts. Men are slightly more likely to smoke than women. Younger people are also more likely to smoke than older people.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on tobacco manufacturers and importers. They will face an increase in tobacco duty rates that they are likely to pass onto consumers.
There will be a negligible one-off cost to these businesses of familiarisation and amending systems to reflect the new rate and new category. It is not expected there will be any ongoing costs. There is no impact on civil society organisations.
Small and micro business assessment: higher annual increases in tobacco duty will affect all sizes of businesses, including small and micro business.
Operational impact (£m) (HMRC or other)
HMRC will incur a negligible cost for changing tobacco duties.
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
- 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 Excise: enquiries helpline.