Vape Shops Face Business Rates Blow in Healey’s Budget Despite No New Vaping Tax Hikes

Vape shops will lose access to business rates relief from April under measures announced by Chancellor John Healey in the Budget, although smokers and vapers have been spared further increases in tobacco and vaping duties.

The change will remove vape retailers’ eligibility for the five-pence business rates discount available to retail, hospitality and leisure businesses. They will also become ineligible for small business rates relief.

The measures are intended to help fund an increase in the threshold for small business rates relief from £12,000 to £18,000. Treasury estimates suggest the withdrawal of relief from vape shops will generate £10 million annually.

Healey said the additional revenue would help provide financial relief to other high street businesses, including pubs.

Government Says Changes Will Target High Street Problems

The Treasury said the policy was intended to help strengthen high streets and address concerns about businesses linked to organised crime.

The announcement follows a pledge by Prime Minister Andy Burnham to make it harder for what he described as “dodgy vape shops” operated by criminal gangs to establish themselves in struggling town centres.

However, the proposed changes have raised concerns among legitimate vaping retailers, who say they could face higher operating costs while other businesses selling the same products remain eligible for relief.

Vape businesses are seeking clarification from the Government about how the new rules will be applied.

Vaping Industry Warns of Unfair Treatment

John Dunne, director general of the UK Vaping Industry Association (UKVIA), criticised the decision, arguing that specialist retailers could face higher business rates than neighbouring convenience stores selling identical products.

He said the changes risked creating a “deeply unfair, two-tier vaping retail market”.

Dunne also highlighted the role specialist vape shops play in helping adult smokers switch away from cigarettes, saying they provide advice, guidance and support.

He warned that making these businesses less financially viable could undermine the Government’s smoke-free ambitions.

Dunne said the Government had yet to provide a clear definition of what constitutes a vape shop and called for urgent clarification.

He added that the absence of further vaping duty increases was welcome, but argued that enforcement against illegal traders would be preferable to imposing additional costs on legitimate retailers.

Anti-Smoking Charity Calls for Careful Implementation

Hazel Cheeseman, chief executive of Action on Smoking and Health (ASH), said the Government would need to ensure the policy targeted the types of businesses causing concern, including those associated with criminal activity.

Cheeseman said vaping was not risk-free but was considerably less harmful than smoking and could help people quit cigarettes.

She argued that the review should also consider shops selling tobacco and warned against reinforcing the misconception that vaping carries the same risks as smoking.

Cheeseman added that a levy on the tobacco industry could potentially raise an estimated £5 billion over five years.

The Treasury was contacted for comment.

Vaping Duty Introduced Alongside Higher Tobacco Taxes

The business rates announcement follows the introduction of a dedicated Vaping Products Duty on October 1, when a flat levy of £2.20 per 10ml of vaping liquid took effect. The duty applies even to liquids containing no nicotine.

The measure came alongside an increase in tobacco duty, with some vaping products expected to become significantly more expensive.

Vaping industry representatives have claimed that the £2.20 charge can amount to a 264 per cent increase once VAT is included.

Prices of some vape liquids reportedly doubled following the introduction of the duty, with lower-priced products particularly affected.

A person using 270 bottles of 10ml vape liquid annually could face an additional cost of around £600, according to the figures cited in the report.

HM Revenue and Customs has provided retailers with a six-month grace period to sell existing stock purchased before the duty took effect.

Tobacco Duty Increases Add to Consumers’ Costs

Tobacco duty increased on October 1 by the rate of inflation, measured using the Retail Prices Index, plus an additional two percentage points. A further one-off levy of £2.20 was applied per 100 cigarettes or 50g of tobacco products.

Treasury estimates indicate that the changes increased the price of a pack of 20 cigarettes by £1.21 and a typical 30g packet of rolling tobacco by £2.54.

The cost of a 10g cigar product rose by 81p, while a 30g packet of pipe tobacco increased by £1.95.

Duty on heated tobacco products, including those sold under the IQOS and Ploom brands, has also risen. From October 1, users faced an additional 45p per 6g pack, following increases that have raised the duty by almost a quarter since October 2024.

Manufacturers and importers pay the duties to HMRC, although some or all of the additional costs may be passed on to consumers.

Vape Retailers Prepare for Further Regulatory Changes

From April 1, 2027, all vape products will be required to carry an HMRC stamp intended to help identify legitimate products and combat the illegal market.

The Government is also consulting on proposals to restrict brightly coloured packaging and marketing considered attractive to young people.

Additional restrictions on sales to under-18s are due to cover nicotine pouches, zero-nicotine vape liquids and vape components such as coils. The changes are intended to close loopholes that previously allowed some products to be sold to children because they did not contain tobacco or fall under existing nicotine-product rules.

Lawmakers are also addressing the purchase of vapes by adults on behalf of under-18s, making it an offence similar to buying cigarettes or alcohol for children.

Government Maintains Plans to Restrict Cigarette Sales by Age

The Government is maintaining plans for a progressive increase in the legal age for purchasing cigarettes.

Under the policy, people born on or after January 1, 2009, would be prevented from legally buying cigarettes as the minimum age rises by one year annually.

The policy was first proposed by the Conservatives and is being retained by the current Government.

Budget Includes Energy Support and Other Tax Measures

Elsewhere in the Budget, Healey announced a £100 energy payment for 20 million households this winter, alongside plans to abolish standing charges on gas bills and extend the zero per cent VAT rate on electricity until July.

However, energy bills are expected to rise, with the energy price cap projected to increase by 27 per cent in the New Year.

The Chancellor also announced an additional three-percentage-point corporation tax surcharge for banks to help fund a £5.5 billion increase in benefits.

The Office for Budget Responsibility forecast economic growth of 1.2 per cent this year, slowing to 1 per cent next year.

Opposition leader Kemi Badenoch criticised the Budget in the House of Commons, describing it as insufficient and questioning the scale of the measures announced.