HMRC may have underestimated how much e-liquid people use when calculating the impact of Britain’s incoming vape tax, according to Vape Club director Dan Marchant.
The Vaping Products Duty will apply from 1 October at a flat rate of 22p for every millilitre of e-liquid, whether or not it contains nicotine. It will add £2.20 in duty to a 10ml bottle and 44p to a 2ml pod.
VAT will continue to apply and is calculated on the value of goods including excise duty, meaning the duty could add £2.64 to the retail price of 10ml if the full cost is passed on.
Writing on the Vape Club blog, Marchant said a Freedom of Information request found that HMRC had worked from an estimated average consumption of 617ml per vaper each year.
That amounts to about 11.9ml a week, or 1.7ml a day. Marchant said the figure appeared low when compared with Vape Club’s sales data and the consumption reported by its customers and staff.
“We believe the Government has used incorrect figures when deciding how much tax to charge,” he wrote in the Vape Club blog.
Annual cost could be considerably higher
At the government’s assumed consumption level, the duty and associated VAT would add around £163 a year to an individual’s costs if passed on in full.
However, somebody using 20ml a week would pay about £275 more each year. At 40ml a week, the increase would be around £549.
Marchant argued that a low estimate of average consumption could therefore understate the financial pressure facing regular users, particularly those using refillable devices.
Vape Club has worked with the UK Vaping Industry Association to gather consumption information directly from vapers, with the aim of persuading HMRC to reconsider the rate.
Marchant said the size of the tax “risks sending vapers right back to smoking”.
Flat rate was set to preserve expected revenue
The government initially proposed three different duty rates based on nicotine strength, ranging from £1 to £3 for every 10ml of liquid.
It later replaced that structure with a single £2.20 rate following consultation responses that raised concerns about complexity, product reformulation and opportunities for tax avoidance.
Its consultation response said the flat rate had been set to raise a similar amount of money to the abandoned three-tier system. At the time, the government said the duty would generate £525 million in revenue.
The latest HMRC impact assessment forecasts receipts of £135 million in 2026-27, when the duty will operate for half the financial year, rising to £565 million by 2030-31. The figures have been certified by the Office for Budget Responsibility.
Government policy costings say the tax base was estimated using industry and market research on e-liquid consumption. They also include adjustments for reduced demand, movement towards tobacco, stockpiling and non-compliance, while identifying both the size of the market and consumer behaviour as significant areas of uncertainty.
The documents establish that expected revenue influenced the choice of the flat rate. They do not provide evidence that Ipsos changed its research findings to meet a predetermined revenue figure.
Questions over Ipsos research
The consumption estimate was linked to research commissioned by HMRC and conducted by Ipsos between May and July 2023.
Marchant questioned the reliability of respondents recruited through an online panel, arguing that incentives for taking part could encourage some people to misrepresent their vaping status.
The official Ipsos summary describes the survey as using an online random probability panel. It involved 2,518 current or former vapers and current or former smokers, alongside interviews with 21 vapers and 18 vaping businesses.
Ipsos found that 12 per cent of UK adults reported currently vaping, which it said was consistent with national data. It also found that 54 per cent of current vapers mainly used reusable products, while 43 per cent mainly used disposables.
The published Ipsos executive summary does not include the 617ml annual consumption figure, which Marchant said HMRC supplied in response to Vape Club’s Freedom of Information request.
Government accepts some could return to tobacco
HMRC estimates that 5.1 million people will be affected by the duty and says heavier vapers will carry the greatest financial burden.
Its impact assessment also acknowledges that some people may respond to higher vape prices by moving to tobacco. The government says a corresponding increase in tobacco duty is intended to preserve the financial incentive to choose vaping over smoking.
The tax was a central subject at the UKVIA Industry Forum on 13 July, where the association scheduled new research examining its expected effects on consumer behaviour, smoking cessation, illegal sales and local stop-smoking services.
The concerns were also discussed at the UK Vaping Industry Association’s forum on 13 July, where the organisation presented new research on the potential effects of the duty on consumer behaviour, smoking cessation, illicit sales and stop-smoking services.
