Soft Drinks Industry Levy

Policy Position

In the 2016 Budget a soft drinks industry levy was announced with the details confirmed in the 2017 Budget. The levy targets producers and importers of the drinks, aiming to encourage reformulation, with the levy applying from April 2018.

FDF opposes the soft drinks industry levy as we believe it is wrong in principle to single out individual nutrients or product categories for punitive treatment.

We strongly believe that action is needed to tackle obesity. And we are committed to this cause. Equally, we believe that interventions shown by robust evidence to present the greatest chance of being effective should be adopted. For manufacturers, that means innovating to help lower calorie intakes through product formulation and portion size.

The food and drink industry has taken proactive action for a number of years and recent ongoing voluntary work on reducing sugars and portions sizes shows its continued commitment to being part of the solution. Many FDF members provide low sugars or no sugars soft drinks options, and almost 60% of soft drinks sold in the UK are no sugars or low sugars products.

The soft drink sector announced in December 2015, well before the 2016 Budget, their intention to cut calories by 20%, by 2020. This is in addition to the 16% reduction of calories in soft drinks since 2012.

It is essential that the soft drinks industry levy undergoes a rigorous evaluation and the full impact of the levy closely monitored before there is any thought of extending it.


HMT soft drinks industry levy

The levy is aimed at producers and importers of soft drinks with the rates differing depending on the amount of total sugars in the drinks.

0 to <5 g sugars / 100ml → 0 pence
5 to >8 g sugars / 100ml → 18 pence per litre
≥8 g sugars / 100ml → 24 pence per litre

The 100ml refers to the ‘prepared drink’, meaning any drink that requires dilution will be assessed at the diluted level indicated on the product packaging.

Drinks that are excluded from the levy include:

  • 100% fruit and vegetable juice with no added sugars
  • drinks containing at least 75% milk
  • milk substitute drinks e.g. soya milk
  • products used to treat dietary conditions
  • drinks containing over 1.2% ABV alcohol

Small producers and importers will be exempt from the levy, with the small producer threshold set at one million litres of product. Tax credits are also available where the levy has been paid but the drinks are exported from the UK, lost, or destroyed.

Further details are published in the Finance Act 2017.

In May 2018, PHE published sugar reduction guidelines for the drinks outside of the soft drinks industry levy; 'Sugar reduction; juice and milk based drinks'.

Sugar Reduction in Soft Drinks

As part of the PHE sugar reduction programme, data is also collected on sugar reduction in drinks subject to the levy. According to Kantar data, the average sugar content of levied drinks decreased by 28.8% between 2015 and 2018 (measured in sales weighted average grams per 100ml). This percentage decrease is much greater than that seen for the food categories included in the sugar reduction programme. However, sugar reduction in drinks is much easier than reducing sugar in foods, where sugar plays a role beyond taste.

Evidence and impact

There is no evidence currently available which demonstrates that food taxes have an effect on obesity or long-term behaviour change. In 2013, Denmark repealed its fat tax because of its negative economic impact and abandoned plans for a tax on sugar. In Mexico the impact of a soft drinks tax saw an initial reduction of only 6 calories a day per person, in a diet of over 3,000 a day.

The independent 2014 McKinsey Global Institute report, which is one of the most comprehensive and wide-ranging global studies on the issue, found that a 10% tax on high-sugars and high-fat products in the UK would be ten times less effective than reducing portion sizes and eight times less effective than reformulation of products.

Revenue from Soft Drinks Levy

HMRC has published statistics on receipts, liabilities and volume for the Soft Drinks Industry Levy.

Results from the first two quarterly returns estimate that the levy has raised a net value of £153.8 million so far. (Suggesting that revenue for the first year will be around half of the £500M originally estimated).

Other notable results include:

  • Over 90% of liabilities were at the higher rate (drinks over 8g sugar per 100ml).
  • Gross liabilities declared in July to September were 48% higher than those declared in April to June. The report states this is probably due to seasonality and / or trader behaviour ahead of implementation.
  • 85% of gross liabilities were declared as packaged (within the UK) as opposed to imported.
  • 457 traders are currently registered for the levy.

The second report of this nature will be published in autumn 2019.

NHS sugary drinks restriction

Suppliers have been asked to provide quarterly self-reported data to the NHS, the first of which was submitted in October 2017. Following introduction of the voluntary scheme, the proportion of sugary drinks sold across the NHS estate has reduced from 15.6% to 8.7%. In June 2018, NHS England announced that it would not implement a ban on selling sugary drinks across the NHS estate, due to the success of the voluntary programme. The NHS estate must continue to cap sales of sugary drinks at 10% or less, to avoid future legislative action.

Last reviewed: 07 Nov 2019