Understanding & navigating the upcoming changes to the UK sugar tax
The drinks industry has made strides in reducing sugar content to help improve health outcomes for consumers; prompted, in part, by the implementation of the ‘sugar tax’.
Now the government has announced that the tax’s thresholds are to be increased (in line with inflation) and that it is reviewing whether to broaden the levy’s scope to add an additional threshold or include previously exempt drinks.
What is the sugar tax (UK)?
The Soft Drinks Industry Levy (SDIL UK) – commonly referred to as the ‘sugar tax’ – was introduced in 2018 in a bid to improve health by reducing the sugar content in drinks. It is levied against pre-packaged soft drinks containing added sugar and is tiered according to sugar content – drinks with <5g sugar per 100ml are exempt, while drinks with 5-8g sugar per 100ml currently pay 18p per litre and those with more than 8g per 100ml must pay 24p per litre.
What are the sugar tax changes in 2025?
The fundamental elements of the sugar tax are not changing, the levy itself is simply being increased (for the first time since it was introduced). From April 2025, the Soft Drinks Industry Levy (SDIL UK) will rise in line with inflation, reflecting the 27% Consumer Prices Index (CPI) inflation seen between 2018-2024, the government says.
The rates are also set to be adjusted to apply per 10 litres, rather than per litre, to also better reflect the CPI. As such, the current 18p per litre rate (for sugar content of 5-8g per 100ml) will become £1.94 per 10 litres, while the current 24p per litre rate (for sugar content >8g per 100ml) will become £2.59 per 10 litres.
The rates will also start to be assessed annually, to account for inflation, with any upcoming changes announced in the preceding Autumn budget.
When will the sugar tax changes 2025 come into force?
The UK’s sugar tax changes will be enforced from April 1, 2025.
How much sugar tax will you need to pay?
Our updated sugar tax calculator will help you to work out the amount of tax you will be required to pay on your drink following the forthcoming changes from 1st April 2025.
If you would like to calculate sugar tax levels pre April 2025, please visit our current sugar tax calculator
In practice:
The sugar tax changes mean drink brands will see an increase in the costs associated with producing drinks with higher sugar content, along with some additional initial administrative costs, although they are being reassured these are likely to be modest. For example, a 330ml canned drink with higher sugar content (>8g per 100ml) will be subject to a 3p increase by 2030.
It is widely anticipated that producers will explore and implement product reformulations again; adapting or updating recipes to further reduce sugar content.
Additionally, drink brands will likely need to adapt pricing and packaging strategies to suit the levy’s new volume structure (per 10ltr, rather than per 1ltr). This might require updates or adjustments to internal processes around reporting, accounting or logistics.
The changes also offer an opportunity. As health and wellness considerations influence consumers’ buying habits, promoting better-for-you products and proactive approaches around public health concerns can be key to marketing strategies.
Impact of the sugar tax to date:
The levy has contributed to reducing consumer’s sugar intake from sugary drinks. Almost 9-in-10 soft drinks sold (89%) are already not subject to the SDIL UK, as they fall below the <5g per 100ml threshold.
The British Soft Drinks Association says the industry delivered an average 43.5% reduction in sugar in soft drinks between 2014-2020, with around 7-in-10 soft drinks now sold as low or no calorie.
Despite this, the government says updates are required since sugar consumption “remains significantly above recommended levels”. As such, it is also reviewing which drinks fall within the SDIL’s scope, including exploring whether to make milk-based drinks subject to the levy.
Currently, milk-based drinks are not subject to the levy providing they contain 75ml of milk per 100ml – an exemption initially made to avoid discouraging higher calcium content and consumption. Milk substitutes like plant-based alternatives are also exempt, to treat animal milk and plant-based milk fairly, providing they contain at least 120mg of calcium per 100ml.
The government is also considering introducing additional measures within the Soft Drinks Industry Levy. It is looking at whether the 5g threshold should be lowered, and is weighing up whether to increase the higher rate for drinks with >8g sugar content per 100ml or introduce a third tier for drinks with a sugar content of >10g.
Simpson’s view:
Caleb Simpson, Managing Director of Simpson’s Beverages, said: “The sugar tax has contributed to reducing consumer’s sugar intake in the UK. It’s worth noting, though, that many drinks brands were already reducing sugar content before the levy was even introduced – understanding the wants and needs of their target markets and using innovation to reformulate recipes. The drinks industry has shown that it listens to consumer concerns and responds with products that don’t compromise on taste, quality or cost.”
At Simpson’s, we help our customers to understand how sugar tax works, navigate the legislation, and limit or avoid its implications by reformulating drinks. To discuss revising or reformulating your products, get in touch with our team.
