UK government consults on strengthening soft drinks 'sugar tax'

The SDIL, or sugar tax, currently applies to pre-packaged drinks with a sugar threshold of 5g sugar per 100ml. Drinks with a sugar threshold between 4g and 4.9g are currently exempt from the levy. However, under new proposals the SDIL’s minimum threshold would be extended to include drinks containing 4g sugar per 100ml.

Under the proposals, the government would also remove the exemption currently applied to milk-based drinks and milk substitute drinks. The milk-based drinks exemption was originally applied in April 2018 when the SDIL was first implemented over concerns that teenage girls already did not get enough calcium in their diet.

However, the government says that recent research has shown milk-based drinks only provide up to 3.5% of calcium intakes for children aged 11 to 18 years. “When weighed against the harms of excess sugar, the contribution these drinks make to calcium intakes does not justify their continued exemption from the SDIL,” the government said.

Instead, there are proposals to introduce a “lactose allowance” for these products, which would take into account natural sugars contained in the milk component of these drinks, as well as those sugars derived from the principal ingredient of milk substitutes, such as oats or rice.

The extension of the SDIL follows the government’s announcement in the 2024 autumn budget that it would conduct a review to identify opportunities to improve the levy’s effectiveness at reducing sugar in soft drinks. HM Treasury has opened a consultation to allow the food and drinks industry to share its views on the proposals, which will run until 21 July.

The government says reducing the threshold to 4g would be “achievable” given 73% of the industry’s soft drinks are already below 4g sugar.

However, Zoe Betts, a regulatory expert at Pinsent Masons, said the levy’s extension could pose considerable challenges for the industry. “The announcement appears to have had a mixed reaction, with some stakeholders concerned at the additional burden on businesses at a time they can least afford that,” she said. “Others have voiced concern that the result will be an increased tax on ‘working people’ which the Labour party undertook not to impose.”

Following the consultation, the government says it will confirm any changes made to the SDIL in the next autumn budget. Any policy changes are expected to take effect on 1 April 2027 to allow manufacturers time for product reformulation.  

Around 89% of soft drinks sold in the UK are not subject to the SDIL as they contain less than 5g sugar per 100ml – a factor which the government says is largely a result of product reformulation since the SDIL came into effect in 2018. Research published in July 2024 indicates that the introduction of the SDIL has already led to a significant reduction in sugar consumption in both adults and children.

Hannah Burton of Pinsent Masons said further regulatory change will require careful consideration and, crucially, industry collaboration. “The anti-obesity aims are welcomed but as always care will be required to ensure any change is well thought through with clear guidance given on what will or will not be in scope,” she said. “With some concerned that reformulation results in sugar substitutes used, which may themselves fuel obesity, emerging knowledge will have to be taken into account before an additional burden is imposed.”