New tax on vapes announced in Budget

The Government is to introduce a new tax on vapes in a bid to discourage non-smokers from taking up the habit.

During his Budget speech, Chancellor Jeremy Hunt told the Commons he was confirming “the introduction of an excise duty on vaping products from October 2026 and publishing a consultation on its design”.

However, he said that, because vapes “play a positive role” in helping smokers quit, there will also be a one-off increase in tobacco duty to ensure vaping remains cheaper than smoking.

Budget documents published by the Treasury said the Government would introduce a one-off tobacco duty increase of £2 per 100 cigarettes or 50g of tobacco.

Currently, vaping products are subject to VAT at 20% but, unlike tobacco, they are not also subject to excise duty.

The Government has already published its plans to ban disposable vapes and will bring in new powers to restrict vape flavours and packaging.

Shares in London’s vaping companies soared on Wednesday despite the new tax. Chill Brands, which sells zero-nicotine vapes among other products, was trading up around 16% at one point during the day.

Meanwhile Supreme, which produces vapes with and without nicotine, saw its shares rise around 13% on Wednesday afternoon.

It comes as NHS England chief executive Amanda Pritchard welcomed Mr Hunt’s announcement of a £3.4 billion investment in NHS productivity through things such as expanding the use of artificial intelligence (AI), cutting paperwork for medics, and improving access to patients.

The Chancellor also announced an extra £2.45 billion for day-to-day NHS spending, which will cover areas such as wages.Ms Pritchard said: “Today’s announcement shows the Government continues to back the NHS and the £2.45 billion of extra funding for next year ensures we have the support we need to make continued progress on our key priorities for patients.

“Adopting the latest technology is already having an impact on the way we deliver services for patients – including getting your prescriptions on the NHS App, and virtual wards which let people recover at home.

“The significant £3.4 billion investment in capital to fund new technology means the NHS can now commit to deliver 2% annual productivity growth in the final two years of the next Parliament, which will unlock tens of billions of savings.”

In his Budget speech, Mr Hunt said making changes to the NHS “on the scale we need is not cheap”. The £3.4 billion investment will start in 2025/6.

The Institute for Fiscal Studies said the £3.4 billion of capital funding was sensible but was coming after the general election.

It said: “The Chancellor has, in effect, announced ‘extra’ spending relative to a baseline that doesn’t exist.

“He has promised this extra spending, but it will be for the next government to deliver (and fund) this in the next spending review.”

In his speech, Mr Hunt told the Commons: “The investment needed to modernise NHS IT systems so they’re as good as the best in the world costs £3.4 billion, but it helps unlock £35 billion of savings – 10 times that amount.

“With that new investment, we will slash the 30 million hours lost by doctors and nurses every year through outdated IT systems.

“We will cut down and potentially halve form-filling by doctors using AI…

“We will fund improvements to help doctors read MRI and CT scans more accurately and quickly, speeding up results for 130,000 patients every year and saving thousands of lives, something I know would have delighted my brother Charlie, who I recently lost to cancer.”

He said all hospitals will use electronic patient records, “making the NHS the largest digitally integrated healthcare system in the world”.

Sir Julian Hartley, chief executive of NHS Providers, said the extra £2.5 billion for day-to-day NHS spending “will offer much-needed – but temporary –  respite” from financial pressures facing NHS trusts.

He said the £3.4 billion technology investment will give workers in the NHS a boost “but they also need politicians from all parties to recognise overstretched staff are already working incredibly hard to treat patients with increasingly complex conditions within existing resources and in the face of relentless demand”.

On the vaping tax, Simon Clark, director of smokers’ lobby group Forest, said it is “stupid, short-sighted and potentially counter-productive”.

Christopher Snowdon, head of lifestyle economics at think tank the Institute of Economic Affairs, said it is a “deeply cynical cash grab from the Chancellor”.

He added: “Forget sin taxes – this is a saint tax. Vapers did what the Government wanted and gave up smoking. They are now being punished for it.

“This is scientifically and economically illiterate. Combined with the ban on disposable vapes, it seems the Government is intent on keeping people smoking.”

Harriet Edwards, head of policy at Asthma and Lung UK, said: “This urgent action to stop young people from vaping can’t come soon enough.

“Disposable vapes are far too attractive and easy for children to buy.

“Introducing a new tax on vapes is a crucial step forward which will make them less accessible to young people.

“We also support the increase in tobacco duty; making smoking more expensive will protect generations, old and new, from developing incurable lung conditions.

“What isn’t clear is whether the funding will be ring-fenced for smoking cessation services.

“If the Government is serious about a smoke-free future, this support has to be at the very heart of its plans.”