The government has proposed expanding the sugar tax, currently applied to fizzy drinks, to include milkshakes and other milk-based beverages. The potential change would eliminate the exemption for dairy-based drinks and non-dairy alternatives such as oats or rice. Chancellor Rachel Reeves introduced the idea of broadening the levy during her autumn budget announcement last year, which aims to address issues related to obesity.
In addition to extending the tax to milk-based drinks, the Treasury has suggested lowering the maximum sugar content allowed in beverages before becoming subject to the levy, from 5g to 4g per 100ml. Government analysis indicates that approximately 203 pre-packaged milk drinks, constituting 93% of sales in the category, will be affected unless their sugar levels are adjusted accordingly. The exemption for milk-based beverages was initially put in place due to concerns regarding calcium intake, particularly in children, but the government has noted that the health benefits may not outweigh the negative impact of excess sugar consumption.
By incorporating milk-based and milk substitute drinks into the soft drinks industry levy (SDIL), the government hopes to incentivize manufacturers to further reduce sugar content in their products. Although 89% of soft drinks sold in the UK currently avoid the levy due to reformulation efforts by manufacturers since 2018, there has been a tendency for products to hover just below the 5g threshold to avoid taxation. The government’s consultation on these proposed changes is scheduled to run until July 21.
Since its implementation in 2018, the SDIL has generated £1.9 billion in revenue, with £338 million collected by HMRC for the 2023-24 fiscal year. Critics of the levy, including the soft drinks industry, pubs, and off-licenses, argue that it unfairly impacts lower-income families and has minimal impact on combating obesity. In response to the latest proposals, the Food and Drink Federation expressed its willingness to participate in the consultation, highlighting the industry’s progress in reducing sugar levels in beverages over the years. The organization emphasized the need for the government to support businesses in innovating and establish clear long-term objectives to foster confidence in the industry
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