What is The Difference Between Vape Tax and VAT?
With the new UK vape duty — or ‘vape tax’, scheduled to come into effect on the 1st October 2026, many people are beginning to wonder how it will operate and what it will mean for everyday vapers.
One of the most confusing elements of the upcoming duty is how it interacts with VAT (Value Added Tax). In this blog, we’ll outline the key differences between the two and explain how they will work together to create a dual tax system applying to all vape liquids, similar to the approach already used for tobacco and alcohol.
If you'd like to know more about the vape tax as a whole, read our blog: Everything You Need to Know About The UK Vape Tax.
How Does VAT Apply to Vape Products?
VAT already applies to all vaping products, and covers most goods and services across the UK. It is applied at a flat rate of 20% of the total value of the goods or services, on top of their base pricing. VAT works to fund public services and is in place for the benefit of everyone.
Where value is added to goods, VAT is applied, meaning there can be several instances of VAT being applied for one product. On a vape liquid for instance:
- VAT is initially charged for raw materials
- VAT is then charged when the e-liquid is sold to retailers
- When retailers sell the e-liquid, VAT is charged once again to the consumer
Ultimately, the price paid by the consumer considers the total value of all transactions combined, plus the 20% VAT charge.
Businesses will submit VAT records to HMRC, which ensures tax returns have been complied with, and VAT revenue can be tracked.
How Does Vape Duty Apply to Vape Products?
As the name would suggest, the vape duty is unique to vape products, unlike VAT which covers most goods and services in the UK. It is charged at 22p per ml of e-liquid, regardless of nicotine content. This charge is only applied once, unlike VAT, which is applied on every stage of the supply chain:
- Vape duty is charged once; a 10ml bottle of e-liquid would cost £2.20 more, for example
- After this charge is made, VAT is then applied, making up 20% of the overall value of the product, including the vape duty
As the vape tax scales with millilitre concentration, all vape liquids will be affected, most particularly larger containers such as shortfills, which are intended to be more cost-effective. Zero-nicotine e-liquid is also affected, as despite their lack of nicotine concentration, they are still affected as a 'vaping product'.
Where VAT works solely for the benefit of funding public services, the vape duty is an excise tax which discourages people from buying potentially harmful products, whilst generating further revenue for public services.
In the same regard as tobacco and alcohol products, the vape duty is managed through the Vape Duty Stamp Scheme (VDS) and requires physical duty stamps to demonstrate their product's compliance with standards. It also allows e-liquids to be more easily traceable, so authorities can be certain that the products are legally compliant and duties have been paid.
Vape Duty and VAT Prices Combined
From 1st October 2026, when the vape tax is introduced, e-liquids will move to a dual-tax system similar to alcohol, tobacco, petrol, diesel and other products considered harmful to health or the environment.
Under this system, VAT will be charged alongside the new vape duty, pushing e-liquid prices even higher.
Right now (pre-VPD), the price you pay for an e-liquid in our store already includes the standard 20% VAT. However, once duty stamps become mandatory (post-VPD), e-liquids will incur an additional VAT charge. This is because the duty stamp itself is treated as an added item or service purchased with the liquid.
In other words, under the new vape tax rules, VAT will apply both to the e-liquid and to the duty amount, as the product gains value once the duty stamp is affixed.
To give a clearer picture of how the dual-taxation will apply, we've measured how this will affect one of our EDGE Core e-liquids.
How Will the Vape Duty Affect EDGE E-Liquid?
To demonstrate, we're using EDGE Very Menthol e-liquid - currently available at a base price of £2.50.
Base price: £2.50
Price after vape duty: £5.14
(Base price + £2.20 vape duty & additional VAT)
How is this calculated?
Bottle size: 10ml
Duty owed: 10(ml) x 22(p) = £2.20
VAT owed for duty: 20% of £2.20 = 44p
Total tax cost added to 10ml bottle: £2.20 (duty) + 44p (VAT) = £2.64
Final e-liquid cost: Base price (£2.50) + tax (£2.64) = £5.14
Don't Miss Out On The Latest Vape Tax Updates
To make it easy for you to stay up to date with the UK vape tax, we have created a dedicated vape duty information page that provides a snapshot of all the key dates and details you need to be aware of, all in one place.
Click the button below to visit the vape tax hub, and bookmark the page so you can check back regularly for any updates.
Other ways to stay up to date with the UK vape tax:
- Subscribe to our email newsletters - Scroll to the bottom of any page in the EDGE Vaping online store, enter your email into the text box, and click subscribe to get any vape tax updates directly to your inbox.
- Get In Touch - If you have questions or concerns about the vape tax, our customer service team are here to help. Head to our Contact Us page to learn more.
