The vaping industry has reacted angrily after Chancellor John Healey announced plans to remove business rates relief from vape shops as part of a drive to clean up Britain’s high streets.
Smokers and vapers avoided a further round of tax increases in the Budget, just weeks after being hit by a series of above-inflation levies.
In his first Budget, Mr Healey said vape shops would no longer qualify for small business rates relief or the discounted rate available to retailers from April next year. Treasury estimates indicate the measure will raise £10million annually.
The announcement has nevertheless prompted concern across the vaping sector. Industry figures fear legitimate retailers that help smokers quit—including shops working with local NHS schemes—could be treated in the same way as the ‘dodgy’ vape stores Andy Burnham has promised to close.
An industry source said: ‘There is concern that specialist retailers could lose all their relief, forcing some out of business, while convenience stores below the threshold continue to benefit from the tax break.’
The decision follows a tobacco tax increase and the introduction of a dedicated levy on vape products on October 1. For heavy users, the new charge could add as much as £600 a year to their tax bill.
Vape businesses are seeking urgent clarification from the Government over how the rules will be applied—and whether support will be available for retailers that actively help smokers give up cigarettes.
Gillian Golden, chief executive of the Independent British Vape Trade Association, which represents retailers, said ‘responsible businesses’ risked being grouped with ‘rogue high street traders’ under the new approach.
Do YOU run a vape shop? Will this affect you? Email: jon.brady@dailymail.co.uk
Vape shops will lose their eligibility for business rates relief under Chancellor John Healey’s Budget plans
John Healey, pictured today, said revenue from vape shop business rates would help fund additional relief for other high street businesses
Vapers faced a flat duty increase of £2.20 per 10ml of liquid on October 1—a rise lobby groups say amounts to 264 per cent once VAT is included
‘It is difficult to see how growth in every postcode can be achieved by placing yet another financial burden on responsible businesses that help the UK’s 4.9 million adult smokers access cheaper, less harmful alternatives,’ she said.
‘Responsible retailers are already competing with the illicit market and have been dismayed by any suggestion that helping adults stop smoking does not make a positive contribution to local communities.
‘When the relative harms of smoking, alcohol and gambling are considered, the legitimate vaping sector is not being treated fairly.’
John Dunne, director general of the UK Vaping Industry Association (UKVIA), accused Mr Healey of creating a ‘deeply unfair two-tier market’ while failing to clarify the legal definition of a vape shop.
He told Our News Outlet: ‘Today’s Budget risks creating a deeply unfair, two-tier vaping retail market. Responsible specialist vape shops could face substantial new business rates bills, while neighbouring convenience stores selling exactly the same products may pay no rates at all.’
He added: ‘Specialist vape retailers play an important role in helping adult smokers quit cigarettes by offering expert advice, guidance and support.
‘Threatening the viability of these businesses risks seriously undermining the Government’s own smoke-free ambitions.
‘The Government has yet to provide a clear legal definition of a vape shop, and this must be addressed urgently.
‘How can it be fair for one independent retailer to receive a substantial new bill while the shop next door, selling the same vaping products, continues to qualify for relief?
‘Although we welcome the absence of further vaping duty increases, the Government should support responsible retailers and target illegal operators—not make life harder for businesses that help smokers quit.’
Hazel Cheeseman, chief executive of anti-smoking charity Action on Smoking and Health (Ash), warned that poorly designed rules could harm legitimate vape retailers that help people stop smoking.
‘Careful policymaking will be needed to ensure the business rates review targets the types of shops that concern the public, including those connected to criminal activity,’ she said.
‘Vaping is not risk-free, but it is far less harmful than smoking and helps smokers quit. Any review should also cover shops selling tobacco.
‘The Government must ensure the policy addresses genuine problems on high streets without reinforcing the dangerous misconception that vaping is as harmful as smoking.
‘If the objective is to raise revenue from businesses whose products harm communities, a levy on the tobacco industry could raise an estimated £5 billion over five years.’
The Treasury was contacted for comment.
The finances of smokers and vapers came under further pressure at the start of the month, when new charges on vaping products took effect alongside an above-inflation tobacco duty increase.
Smokers and other tobacco users also faced the £2.20 levy from October 1, on top of an above-inflation duty increase
Some vape liquids doubled in price overnight when the Vaping Products Levy came into force. The charge is £2.20 per 10ml of liquid, including zero-nicotine formulas, with lower-priced products popular among lower-income vapers affected most heavily.
A heavy user consuming 270 10ml bottles a year could pay an additional £600 annually. HMRC has granted retailers a six-month grace period to sell existing stock.
Cigarette smokers and other tobacco users also faced the £2.20 flat increase, in addition to a duty rise set at two percentage points above inflation.
Then-Chancellor Rachel Reeves said the measures were intended to prevent traditional smoking from becoming cheaper than vaping. She said the Vaping Products Duty would also discourage young people from taking up vaping.
However, John Dunne, director general of the UK Vaping Industry Association, described the vaping tax as a ‘tax on public health’. He said it could increase the price of vape liquid by as much as 264 per cent once VAT was added.
He said: ‘If we are talking about duty, what about the Government’s duty to protect a product that has helped millions of adults reduce or stop smoking, rather than imposing a new tax?
‘Protecting young people is vital. But that requires stronger enforcement against illegal and rogue traders, not making legal vaping more expensive for adults trying to avoid cigarettes.’
Tobacco duty increased on October 1 in line with the retail price index, plus a further two percentage points. A one-off £2.20 charge was also added per 100 cigarettes or 50g of tobacco.
Treasury figures indicate that the changes added £1.21 to a pack of 20 cigarettes, £2.54 to a typical 30g packet of rolling tobacco, 81p to every 10g of cigars and £1.95 to a 30g packet of pipe tobacco.
Duty on heated tobacco products sold under brand names including IQOS and Ploom has risen by almost a quarter since October 2024. From October 1, smokers of those products faced an additional 45p per 6g pack.
Manufacturers and importers pay the duty to HMRC, although some or all of the cost may ultimately be passed on to smokers and vapers through retail prices.
Shane Margereson, owner of online vape retailer Ecigone, previously told Our News Outlet’s sister title This is Money: ‘For vapers, the full impact will not arrive all at once on October 1.
‘Retailers can continue selling stock bought before October at pre-duty prices until the end of March 2027. Prices should therefore rise gradually over the winter rather than jump overnight, with popular flavours likely to sell through first.
‘The industry will absorb the impact and adapt, as it always has.’
From April 1, every vape product must carry an HMRC stamp confirming that it is legitimate, as part of efforts to tackle the illicit vape trade.
Hazel Cheeseman of Ash said uncertainty remained over whether the duty would be passed on directly to smokers.
‘We need to understand not only what happens to prices, but also whether the tax changes vaping and smoking behaviour among adults and young people—particularly those on the lowest incomes,’ she said last month.
The Government is consulting on plans to prohibit brightly coloured packaging and ‘attractive’ marketing by vape companies
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Could removing business rates relief for vape shops loosen their grip on Britain’s high streets?
Treasury figures suggest the duty will generate £130million in tax revenue each year until 2030.
Since taking office, Labour has pursued a series of measures affecting smokers and vapers. Ministers banned disposable vapes in June last year, saying the move was designed to discourage young people from taking up vaping.
Critics argue the ban has fuelled a black market in disposable vapes, while recycling organisation Material Focus says millions of products described as ‘reusable’ are still discarded each month.
Ministers are also consulting on a possible ban on brightly coloured packaging and ‘attractive’ marketing by vaping companies.
From tomorrow, retailers will be prohibited from selling nicotine pouches, zero-nicotine vape liquids and vape components such as coils to anyone under 18.
Previously, a loophole allowed these products to be sold to children because they contained no tobacco and were not covered by legislation governing other nicotine products.
Lawmakers are also closing a gap that allowed adults to purchase vapes for under-18s. Doing so will become an offence, much like buying cigarettes or alcohol for children.
Labour is retaining the effective lifetime ban on cigarettes for anyone born on or after January 1, 2009, a policy first proposed by the Conservatives.
From New Year’s Day 2027, people aged 18 will no longer be able to legally buy cigarettes, with the minimum purchase age rising by one year every year.
Elsewhere in the Budget, the Chancellor promised 20million households a £100 contribution towards energy bills this winter. He also imposed an additional three per cent corporation tax surcharge on banks to help fund a £5.5bn increase in benefits.
Mr Healey promised ‘breathing space’ for financially pressured families as he set out plans to reduce fiscal headroom to £15bn by 2029-30, down from £23.6bn, while cutting borrowing over the next five years.
He confirmed plans to abolish standing charges on gas bills, which had been announced earlier on Wednesday, and extend the zero per cent VAT rate on electricity bills until July alongside the £100 energy payment.
However, a projected 27 per cent rise in the energy price cap in the New Year is expected to absorb many of those savings.
The Office for Budget Responsibility, the fiscal watchdog, forecast weaker growth for the UK economy, predicting expansion of 1.2 per cent this year followed by just one per cent next year.
Other measures in Mr Healey’s ‘steady as she goes’ Budget—including cuts to tariffs on imported goods such as marmalade and gherkins—were dismissed as an ‘insult to families’. Critics said they would reduce the average weekly shop by only 40p.
Responding in the Commons, Opposition Leader Kemi Badenoch told the Chancellor that his Budget was ‘not good enough, not strong enough, not bold enough’.
She said: ‘Is that it? Really?
‘The prime minister came to office promising to reverse 40 years of neoliberalism. Instead, we got 4p off gherkins.
‘This Budget does not come close to meeting the moment.’
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