Chancellor Rachel Reeves has announced the latest duties and taxes for tobacco products
Chancellor Rachel Reeves has announced the latest changes to the price of cigarettes, cigars, tobacco and other smoking products in today’s Budget – setting how much smokers and tobacco users will pay in the year ahead. Tobacco is a major part of the UK economy – In 2025–26 the government estimates tobacco duties will raise about £8.1 billion, accounting for 0.7% of all tax receipts
The Chancellor has announced that duty on cigarettes will go up by the rate of inflation – likely to be the September RPI figure of 4.5%, plus two percentage points. Duty rates on all tobacco products will increase by RPI inflation +2 ppts. These changes will take effect from 6pm on 26 November 2025.
A one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI + 2 ppts next year will take effect from 1 October 2026 and will be included in the Finance Bill 2025-26.
At Autumn Budget 2024, the government confirmed a flat-rate excise duty at £2.20 per 10ml on all vaping liquid which will come into effect from 1 October 2026. The government also set out a path for uprating tobacco duties by Retail Prices Index (RPI) +2%.
The first statutory tobacco duty regime in modern times dates to the Finance Act 1976, which imposed excise duties on cigarettes, cigars, hand-rolling tobacco and other tobacco products. At that time, the duty was simply a percentage of retail price for cigarettes (20%) or fixed pound-per-pound rates for other tobacco.
The first statutory tobacco duty regime in modern times dates to the Finance Act 1976, which imposed excise duties on cigarettes, cigars, hand-rolling tobacco and other tobacco products. At that time, the duty was simply a percentage of retail price for cigarettes (20%) or fixed pound-per-pound rates for other tobacco.
During the late 1980s and early 1990s, many subsequent governments used a policy of increasing tobacco duty “in real terms” — initially committing to at least a 3% annual increase (1993–1997), then at least 5% on average (from mid-1997).
From 2001, this “escalator” was paused: the government froze duty increases in real terms. In December 2008, following a temporary cut in VAT (from 17.5% to 15%) as a fiscal stimulus, the specific duty on tobacco was raised to compensate. When VAT was restored, the higher duty remained.
In the 2010s, an escalator was re-introduced — typically raising duties by a small percentage above inflation — though with periodic freezes or smaller rises depending on the government and fiscal context. In May 2017 the UK switched to a “mixed” duty system for cigarettes: a combination of a specific duty (pounds per 1,000 sticks) plus an ad-valorem component (percentage of retail price); but with a minimum excise floor to prevent very cheap cigarettes from slipping below a certain tax threshold.
Meanwhile the definition of what counts as “tobacco” has widened: from 2019, heated-tobacco products (HTPs) are taxed under the category “tobacco for heating,” and treated similarly to hand-rolling tobacco for duty purposes.
Tobacco duties are levied on purchases of cigarettes, hand-rolled tobacco, cigars and other forms of tobacco.
There are different rates for each type of product:
VAT is applied after tobacco duty, so, for example, the price of a packet of 20 cigarettes currently reflects the pre-tax price plus 16.5 per cent ad valorem plus £6.69 of duty tax plus 20 per cent VAT on both the pre-tax price and the duty.
- the rate on tobacco for heating is £2.06 for a 6g pack.
- the rate on other smoking and chewing tobacco is £5.50 for a 30g packet and
- the rate on hand-rolling tobacco is £14.30 for a 30g packet
- the rate on cigars is £4.17 for a 10g cigar
- the rate on cigarettes is 16.5 per cent of the retail price plus £6.69 on a packet of 20
VAT is applied after tobacco duty, so, for example, the price of a packet of 20 cigarettes currently reflects the pre-tax price plus 16.5 per cent ad valorem plus £6.69 of duty tax plus 20 per cent VAT on both the pre-tax price and the duty.
These figures will all go up after today’s announcement.
