Currently, VAT is included in the sale price of all vaping products, including e-liquids, vape devices and accessories such as replacement pods and coils.

• VAT is a general tax that applies to almost all goods and services exchanged in the UK, and similar systems are used worldwide.
  
  
• VAT is typically charged at a rate of 20% of the total value of the goods/services, on top of their base price.

VAT accounts for a substantial 20% of central government revenue, used to fund public services like healthcare, education and infrastructure. There is no ulterior motive behind VAT other than ensuring everyone who consumes goods and services contributes to public funds.

How VAT Is Collected:

VAT is collected at every stage of the supply chain where value is added. For example, for e-liquids like our £1 range, we (the manufacturer) pay VAT for the raw materials used to make the e-liquid. When the finished goods are sold to distributors or wholesalers, VAT is charged a second time.

When those parties then sell the stock on to retailers, VAT is charged again. The final price paid by the consumer represents the total value of all these transactions combined, plus the final 20% VAT charge. This system ensures everyone involved contributes to public funds, while allowing room for profits at each stage.

How VAT Is Managed:

Businesses must keep detailed VAT records for every transaction made in a financial year, which are then submitted to HMRC as part of their tax returns. This allows authorities to properly track and manage VAT revenue and ensure it is being paid properly.

The vape duty, or VPD, is a new excise duty unique to vape liquids. The duty will be charged in addition to the base cost (including VAT) of any vape liquids sold from the 1st October 2026.

• Excise duties like the VPD are different from general taxation like VAT, and only apply to products deemed harmful to health or the environment.
  
  
• The VPD will be charged at a flat rate of 22p per ml of e-liquid, regardless of nicotine content. This scales with container size, so 100ml shortfill products will be hit harder than 10ml bottles, for example.

Like VAT, excise duties like the VPD are designed to generate revenue that the government can use to support public services. Unlike VAT, however, excise duties have a dual purpose in that they intend to discourage people from buying potentially harmful products like cigarettes or alcohol, and offset social costs caused by those products.

How The VPD Is Collected:

The vape tax will be paid directly to HMRC by vape liquid manufacturers or importers and is charged only once, at this initial point in the supply chain. If importing e-liquids, the products become liable for the duty once they reach UK shores, and it must be paid before they can be sold.

The products are then sold at a higher cost to distributors, wholesalers, and retailers. This cost is ultimately absorbed by the consumer who will pay a higher overall price for the products, protecting profits by offsetting the duty cost paid by the manufacturer/importer.

How The VPD Is Managed:

The vape duty will be managed through the Vape Duty Stamp Scheme or VDS. This will work in largely the same way as alcohol or tobacco products do currently, in that physical duty stamps must be added to the outermost packaging of any compliant product captured by the duty.

Manufacturers must apply for approval to the vape duty stamp scheme from the 1st April 2026. Importers must appoint a UK representative to do so. Once approved and registered as a verified supplier of vape liquids, stamps must be purchased from HMRC-approved sources and applied to all applicable products by the manufacturer before they can be sold.

These stamps provide proof that the duty has been paid, but also traceability so authorities know exactly how a vape liquid has moved through the supply chain, ensuring compliance and helping to weed out illegal products.

It will be the responsibility of wholesalers and retailers to ensure stock is properly audited to ensure they only sell products from verified suppliers, with the correct stamps proving duties have been paid.

Trading Standards and HMRC will conduct random audits at all points in the supply chain to enforce compliance.