What is Soft Drinks Industry Levy (Sugar Tax)?

Full Definition

The Soft Drinks Industry Levy, commonly known as the sugar tax, is an excise duty introduced in April 2018 and charged on manufacturers and importers of packaged soft drinks that contain added sugar, based on the total added sugar content of the drink rather than on its final retail price. Two rates apply: a lower rate for drinks with total sugar content of 5 grams or more per 100 millilitres, and a higher rate for drinks with 8 grams or more per 100 millilitres, both set in pence per litre and periodically reviewed. Pure fruit juices with no added sugar, drinks that are at least 75% milk, and small producers below a minimum annual production threshold are excluded from the levy entirely, and many manufacturers reformulated their most popular drinks to bring them below the 5-gram threshold specifically to avoid the charge -- a stated aim of the policy rather than a side effect. Although the levy is charged on manufacturers and importers rather than directly on shoppers, it is generally understood to be passed through, at least in part, into shelf prices for drinks that remain above the sugar thresholds, giving retailers and manufacturers a financial incentive to promote lower-sugar alternatives instead. The levy raises revenue that has historically been earmarked, in part, for programmes such as school sports funding and breakfast clubs, though as with other so-called "hypothecated" taxes, the government retains discretion over overall public spending allocation. The Soft Drinks Industry Levy sits alongside a number of other UK excise duties targeting specific goods for public health or environmental reasons, such as Insurance Premium Tax, Landfill Tax and Plastic Packaging Tax, each charged on a specific tax base rather than as a general sales tax.

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