Excise Duties

Excise duties are indirect taxes imposed on the manufacture, sale, or use of certain products deemed harmful to health or the environment. In the UK, excise duties apply to alcohol, tobacco, fuels, air travel, and sugar-sweetened drinks. These duties are typically charged at the point of production or importation and are separate from VAT.

Alcohol Duty

The UK introduced a new alcohol duty system from 1 August 2023, which reformed the previous structure. The new system bases duty on the alcoholic strength (ABV) of the drink, with higher rates for stronger products. Standard rates start at approximately £28.22 per litre of pure alcohol for beers and ciders, with progressive rates for wine, spirits, and other fermented products. Draught relief (5% reduction) applies to beer and cider served from draught containers of 40 litres or more. Small producer relief reduces duty for qualifying microbreweries and small cider makers.

Tobacco Duty

Tobacco duty is a specific duty (based on quantity) plus an ad valorem element for cigarettes. All tobacco products are subject to duty, which is collected at the point of import or manufacture. Rates are reviewed at each Budget and typically increase by inflation plus additional escalators. Hand-rolling tobacco attracts a higher rate than manufactured cigarettes to narrow the price gap. Minimum excise tax applies to ensure cheap cigarettes cannot undercut duty levels.

Fuel Duty

Fuel duty is charged on petrol, diesel, biodiesel, and other fuels used in road vehicles and certain other applications. The standard rate has been frozen at 52.95 pence per litre for several consecutive years. A temporary 5p cut introduced in 2022 was extended. Rebated fuels (red diesel) are available for agricultural, construction, and other off-road uses, with restrictions tightened in recent years to limit abuse.

Air Passenger Duty

Air Passenger Duty (APD) is charged on passengers flying from UK airports. Rates vary by destination band (domestic, Band A — up to 2,000 miles, Band B — over 2,000 miles) and class of travel (reduced rate for economy, standard for other classes). A higher rate applies to private jets. Children under 16 are exempt from APD on economy flights. The rates are adjusted annually and have been the subject of reform consultations.

Soft Drinks Industry Levy (Sugar Tax)

The Sugar Tax applies to soft drinks with added sugar content above 5 grams per 100 millilitres. Drinks with 5–8g per 100ml are charged at the lower rate, and those with 8g+ at the higher rate. The levy is paid by the producer or importer of the drink. Pure fruit juices and milk-based drinks are exempt. Revenue from the levy is used to fund school sports and breakfast programmes.

Warehousing and Duty Suspension

Excise goods can be held in duty suspension under an excise warehouse regime. Goods can be manufactured, stored, and moved between excise warehouses without payment of duty, which becomes payable only when the goods are released for consumption. Comprehensive records and regular stocktakes are required. Movements under duty suspension must be accompanied by an electronic administrative document (e-AD).