Chancellor Rachel Reeves has unveiled the latest adjustments to the pricing of cigarettes, cigars, tobacco, and other smoking products in the current Budget, determining the upcoming costs for smokers and tobacco consumers. Tobacco plays a significant role in the UK economy, with tobacco duties projected to generate around £8.1 billion in 2025–26, representing 0.7% of total tax revenues.
Under the new announcement, the Chancellor revealed that the duty on cigarettes will rise in line with inflation, expected to be the September RPI figure of 4.5%, plus an additional two percentage points. Duty rates on all tobacco products will also see an increase by RPI inflation plus two percentage points. These adjustments will come into effect from 6 pm on November 26, 2025.
Furthermore, there will be a one-time hike of £2.20 per 100 cigarettes or 50g of other tobacco products, along with an annual uprating of tobacco duty by RPI plus two percentage points starting from October 1, 2026, as part of the Finance Bill for 2025-26.
In a separate development at the Autumn Budget for 2024, the government confirmed a fixed-rate excise duty of £2.20 per 10ml on all vaping liquid, to be enforced from October 1, 2026. Additionally, a framework was outlined for increasing tobacco duties by Retail Prices Index (RPI) plus two percent.
The historical context reveals that the initial statutory tobacco duty regime dates back to the Finance Act of 1976, which introduced excise duties on various tobacco products. Over the years, there have been fluctuations in tobacco duty policies, with the introduction of escalators and adjustments to duty rates based on economic circumstances and government decisions.
Moreover, the definition of “tobacco” has expanded to include heated-tobacco products (HTPs) since 2019, which are now taxed under the category of “tobacco for heating,” treated similarly to hand-rolling tobacco for duty assessment.
Tobacco duties are imposed on purchases of cigarettes, hand-rolled tobacco, cigars, and other tobacco variants, each subject to specific duty rates. The prices of these products are influenced by various factors, including duty taxes and VAT, with the latest changes reflecting the adjustments announced today.