The UK government has announced plans to extend the sugar tax to cover bottled milkshakes and pre-packaged lattes, closing a long-standing exemption for milk-based drinks. The changes to the Soft Drinks Industry Levy (SDIL) will take effect from January 2028, the Department of Health confirmed.
Under the new rules, the current lower threshold at which SDIL applies will be reduced from 5g of total sugars per 100ml to 4.5g per 100ml. The exemption for milk-based drinks with added sugar will be removed, though a 'lactose allowance' will account for naturally occurring sugars in milk. Milk substitute drinks without added sugar, including plant-based drinks with only naturally occurring sugars, will remain outside the scope of the levy.
The original sugar tax, introduced by the Conservative government in 2016, applies to pre-packaged drinks sold in cans and cartons in supermarkets. It was designed to help drive down obesity, particularly among children. The extension aims to further reduce sugar consumption, with 28% of children currently overweight and 41% of 10–11-year-olds overweight.
However, the Institute of Chartered Accountants in England and Wales (ICAEW) has expressed concerns. Ed Saltmarsh, ICAEW technical manager, said the changes introduce 'unnecessary complexity' and may yield only limited public health gains. He argued that lowering the threshold to 4.5g targets just 11% of the market and penalises businesses that previously reformulated, while leaving high-sugar categories like pure fruit juices and smoothies exempt.
Mark Jones, a food and drink expert at law firm Gordons, highlighted the potential benefits, noting that expert reviews identify stronger measures on sugar as effective for improving diets. He said the National Food Strategy and recommendations from innovation agency Nesta support expanded taxation to encourage manufacturers to cut sugar, calling for evidence-based measures in the government's full food strategy due in 2026.
Meanwhile, financial markets rallied ahead of the budget, with the FTSE 100 closing 75 points higher at 9,609 points. UK bond yields fell, with 10-year yields dropping 5 basis points to 4.495%.
