Tax Rates

  • Tax on cigarettes is made up of specific duty of £207.99 per 1,000 cigarettes and an ad valorem rate of 16.5% of the Recommended Retail Price3 . VAT is charged in addition

 

  • A  pack of 20 cigarettes costing £8.85 will be over 80% tax including VAT2 (up to 90% tax for lower priced packs). Click here to view to worked examples

 

  • Tobacco Duty has consistently raised around £9.5 billion since 2011-121.

 

  • Furthermore, the VAT on tobacco products also raises more than £2 billion each year3.

 

  • Combined revenues of around £12 billion are equivalent to over 2.5 pence on the basic rate of Income Tax, just under 2% of all tax revenues or 0.6% of UK GDP (2015-16)4.

 

  • Tobacco Duty costs the average household 0.8% of their annual (2014-15) gross income but the bottom quintile 2.1%5.

 

  • A Minimum Excise Tax (MET) on cigarettes will take effect from 20 May 2017. This will effectively apply to the recommend retail price of products below £7.35 per 20. A worked example can be viewed here

 

  • The TMA’s Tobacco Tax Briefing is available to download here

 

UK AIT report v5 graphics-02

Sources:  1: HMRC TAX & NIC RECEIPTS Monthly and annual historical record, November 2016; 2,3,5: TMA calculations; 5: ONS, The effects of taxes and benefits on household income;

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