Citi analysts have identified the UK government’s new excise tax on vaping products as an encouraging development for British American Tobacco PLC and Imperial Brands PLC.
The Chancellor, Jeremy Hunt, confirmed in his Spring Budget speech that vaping products would be subject to a new tax from October 2026. According to media reports, this move is designed to maintain a financial incentive for choosing vaping over smoking, complemented by a concurrent increase in tobacco duty, according to media reports.
The taxation framework will be based on nicotine content, with a three-tiered system imposing charges ranging from £1-3 per 10ml, in addition to the current 20 percent VAT.
This structured approach aims to regulate the vaping market further and aligns with the government’s health strategy by providing a less harmful alternative to traditional smoking.
Citi’s short research note said: “Although [Wednesday’s] confirmation of the planned levy on vaping comes as little surprise, we believe that alongside the proposed ban on disposable vapes from April 25, the regulatory risk/reward is skewing to the upside for both BATS and Imperial.”