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Tax Gap of Heated Tobacco Products in the United Kingdom

Until 2018, HTPs were taxed as "tobacco products" in any category on a case-by-case basis. In practice, they were taxed as “other smoking tobacco,” at much lower rates than combustible cigarettes.  

After a consultation on “tax treatment of heated tobacco products,” held in 2017, a new law was announced with the Finance Bill 2018-19. Under the Law, heated tobacco products were classified as “tobacco for heating” and taxed at the same rates as hand-rolling tobacco. The law became effective on July 1, 2019 and heated tobacco was taxed at GBP 234.65 per kilogram. E-Cigarettes continue to be untaxed at all as they are not recognized as "tobacco products." This rate is slightly higher than average in the EU, where HTPs are generally treated as "other tobacco." The rate was to be adjusted for inflation each November starting in 2020. Since March 2020 (the beginning of the 2020 fiscal year), heated tobacco was subject to a specific tax of GBP 243.95 per kilogram based on tobacco weight. Since November 16, 2020, the rate is GBP 257.6 per kilogram. For the interactive tax maps, we use the rate as of October 2020 (GBP 243.95), to match the date of the data on prices.

The United Kingdom applies a mixed excise tax system with a minimum excise to cigarettes. Since 2020, the ad-valorem rate has been 16.5% of the retail sales price. The specific and minimum excises are as follows:  

  • From October 29, 2018 to March 11, 2020: a specific excise of GBP 228.29 per 1,000 sticks and a minimum excise of GBP 293.95 per 1,000 sticks 
  • From March 12, 2020 to November 15, 2020: a specific excise of GBP 237.34 per 1,000 sticks and a minimum excise of GBP 305.23 per 1,000 sticks 
  • Since November 16, 2020: a specific excise of GBP 244.78 per 1,000 sticks and a minimum excise of GBP 320.9 per 1,000 sticks

For the interactive tax maps, we use the rate as of October 2020 (GBP 244.78), to match the date of the data on prices.  

Sources

HM Revenue & Customs: Tobacco Products Duty Rates (last updated: Nov 13, 2020) 

Last Updated Mar. 1, 2021