Consultation outcome

Strengthening the Soft Drinks Industry Levy — Summary of responses

Updated 25 November 2025

Executive summary

The government is clear both on the success of the Soft Drink Industry Levy (SDIL) to date – in removing almost half the sugar from shop-bought soft drinks – and the importance of tackling the UK’s obesity crisis, which costs the NHS £11.4 billion per year and businesses £8.9 billion per year.

The Strengthening the Soft Drinks Industry Levy (SDIL) consultation, which ran from 28 April to 21 July 2025, set out the case for, and specific proposals to, reform the levy to drive further soft drink sugar reductions. These proposals were on:

• lowering the lower SDIL threshold to 4g sugar per 100ml
• the treatment of milk-based drinks
• the treatment of milk substitute drinks

The government has carefully considered the over 170 consultation responses received, and the varying and strongly held views of stakeholders. This consultation response summarises the feedback received and, with reference to the arguments made, confirms the government’s final policy decisions and next steps.

The government’s decisions

Lowering the threshold from 5g to 4.5g sugar per 100ml

The government will reduce the current lower threshold at which SDIL applies from 5g of total sugar per 100ml to 4.5g of total sugar per 100ml.

The government remains committed to addressing the obesity epidemic and considers prioritising a system of prevention to be instrumental in tackling the health and economic impacts of obesity.

It has also listened carefully to feedback received on the technical challenges involved in reformulating products to below 4g sugar per 100ml, as well as the costs and risks of reformulation for businesses, which in turn affect their capacity to invest in the UK.

The government considers that lowering the threshold from 5g to 4.5g total sugar per 100ml, rather than 4g total sugar per 100ml as proposed in the consultation, strikes the appropriate balance between supporting health objectives and fostering conditions that allow the soft drink industry to continue to grow and invest.

The treatment of milk-based drinks

The government will remove the current exemption for milk-based drinks, introducing a tax incentive for the producers of these drinks to reduce sugar in their recipes. This applies to pre-packaged milk-based drinks with added sugar, like bottled milkshakes and coffee drinks. ‘Open-cup’ milkshakes prepared in cafés, bars, etc will remain out of scope; as will plain cow’s milk, and other milk drinks without added sugar.

To reflect that Scientific Advisory Committee on Nutrition (SACN) excludes naturally occurring lactose in milk and dairy products from its definition of free sugars and that dietary advice is based on the evidence on free sugars, the government will introduce a ‘lactose allowance’ to account for the naturally occurring sugars in milk.

Following detailed engagement with producers on the calculation of this allowance, the government has made changes to ensure that the vast majority of lactose present in a milk-based drink will be excluded in the ‘total sugar’ value when determining a drink’s liability to SDIL. The only exceptions to this will be lactose or galactose added as an ingredient, hydrolysed lactose, or lactose present in whey powder. This is on advice from health experts that these sugars, although derived initially from milk, should be treated as free sugars.

This moves away from the consultation proposal that based the allowance on the percentage of liquid milk in a product. The revised allowance will include lactose from sources other than liquid milk, such as milk powder, and focus on measuring only free sugars when calculating liability to the levy.

The treatment of milk substitute drinks

The government will remove the exemption for milk substitute drinks with added sugar. This will bring plant-based drinks with added sugar into scope of SDIL, should they contain 4.5g or more total sugars per 100ml.

The government will exclude from scope milk substitutes without added sugar. Plant-based drinks which contain only sugars released from their principal, or ‘core,’ ingredient (such as soya, or oats) will be out of scope, ensuring that unsweetened plant-based drinks continue to be out of scope, just as plain animal milks are.

Implementation of changes to the SDIL

The government has considered representations from industry about the reformulation challenges associated with the implementation date (1 April 2027) proposed in the consultation. The government also acknowledges that the soft drinks industry will be working to deliver the new Deposit Return Scheme up to and within 2027. Taking this into account, the government has extended the proposed implementation date by 9 months to 1 January 2028. This will allow over 2 years for reformulation from the point at which policy is confirmed (now).

Next steps

A technical consultation on the draft legislation will be published in 2026 and changes to legislation introduced in a subsequent Finance Bill, ahead of the legislation taking effect on 1 January 2028. The technical consultation will be to confirm whether the legislation works to deliver the policy intentions set out here, rather than to re-open discussions on the policy itself.

In recognition that the policy changes outlined here will ask soft drink producers to adapt and invest in further reformulation, and that certainty is required to support this process, the government commits to not make any further changes to SDIL this Parliament.

1. Introduction

Given both the continued scale of the health challenge posed by excess sugar, and the success of the Soft Drinks Industry Levy (SDIL) to date, there is a clear case for proportionate changes to expand the levy’s scope and impact.

Since its announcement in 2016, SDIL has successfully led to extensive product reformulation. Between 2015 and 2019, approximately 65% of soft drinks that contained more than 5g sugar per 100ml reformulated to below 5g, bringing the total proportion of the market with less than 5g sugar per 100ml to 89%. This led to a 47% average reduction in sugar in soft drinks in scope of the levy between 2015 and 2024.

Independent studies indicate SDIL has led to positive health outcomes relating to obesity, and a relative reduction of 12% in hospital admissions for dental caries related tooth extractions in all children (aged 0 to 18 years). Children aged 0 to 4 years and 5 to 9 years had relative reductions of 28.6% and 5.5%, respectively.

However, intakes of sugar in the UK exceed recommended levels in all age groups and are around double recommended levels for adults and children aged from 4 years. High intakes of sugar increase the risk of dental decay and weight gain. Being overweight and living with obesity increases the risk of suffering from adverse health conditions in adulthood such as type 2 diabetes, heart disease, stroke and some cancers. A recent report from the National Child Measurement Programme for the 2024 to 2025 academic year show that 10.5% of children (aged 4 to 5 years) in reception and 22.2% of year 6 children (aged 10 to 11 years) are living with obesity. Excluding the pandemic peak, this is the highest obesity prevalence seen in reception since measurements began in 2006 to 2007.

The SDIL review

At Autumn Budget 2024 the government announced a review of SDIL, to identify opportunities to improve its effectiveness at reducing sugar in soft drinks. The government made clear it was not seeking to revisit SDIL’s fundamental design and scope, with the levy remaining a tax on pre-packaged soft drinks with added sugar, but to consider changes to the sugar content thresholds at which SDIL applies; and the current exemptions for milk-based and milk substitute drinks.

The SDIL review ran from Autumn Budget 2024 to Spring 2025. As part of the review, HMT and HMRC officials met with a range of experts and interested parties across industry, academia and civil societies. Informed by these discussions, the government decided not to consult on any changes to the higher SDIL rate, nor the creation of a third SDIL band for the drinks with the highest sugar levels.

The ‘Strengthening the Soft Drinks Industry Levy’ consultation

Following this review, the government published the ‘Strengthening the Soft Drinks Industry Levy’ consultation on 28 April 2025. The consultation set out proposals for changes to the minimum sugar content threshold at which the levy applies, and the current exemptions for milk-based drinks and milk substitute drinks. It closed on 21 July 2025.

These proposals do not impact upon no/low-sugar traditional soft drinks, nor plain milk or unsweetened milk substitutes. The Eatwell Guide states milk and its unsweetened, calcium fortified alternatives can be a healthy source of protein and calcium, and form part of a balanced diet. However, pre-packaged soft drinks, milk-based drinks and milk substitute drinks can contain large quantities of ‘free’ sugars, and do not provide sufficient nutritional benefits to justify the harms from excess sugar.

The consultation received 174 written responses. As part of the consultation process, ministers and officials also held meetings with a wide range of stakeholders, both in planned roundtables and in response to ad hoc requests for discussions.

Of the 174 written responses, 56% were from individuals. Public health academics and organisations were well represented (24%) with the remainder of responses comprising trade bodies (11%), soft drinks producers (5%), milk-based drinks producers (2%) and milk substitute drinks producers and retailers (1% each). A list of respondents to the consultation can be found in Annex A.

This document summarises the responses to the specific areas on which the government consulted, namely:

• a) lowering the lower SDIL threshold to 4g sugar per 100ml
• b) the treatment of milk-based drinks
• c) the treatment of milk substitute drinks

It also sets out in detail the government’s response to the points raised during the consultation process, as well as what the government’s policy will be on each of on the consultation topics.

2. Lowering the threshold (questions 7 to 12)

Summary

Responses to the questions in this section were mixed, with academics and health representatives supporting this proposal on account of its health benefits. In contrast, there was strong opposition from producers and trade associations of the traditional soft drinks industry, who expressed disappointment that despite a programme of reformulation bringing 89% of drinks under the levy threshold, the government was ‘moving the goalposts’ on the soft drinks industry with proposals that require additional reformulation investment. However, many traditional soft drink producers suggested they would consider reformulating their products should the threshold be lowered from 5g to 4g per 100ml, as would the producers of milk-based and milk substitute drinks if their current exemption were removed.

Responses from public health organisations

All respondents from public health organisations strongly supported a reduction in the lower threshold from 5g to 4g total sugar per 100ml. They believe this will incentivise reformulation and reduce sugar consumption, citing evidence of successful past reformulation and sugar reduction following the levy’s introduction in 2018. They commented that positive health impacts would be realised in a reduction in childhood obesity, and in combatting dental health issues, with one noting that the levy is linked to a reduction in the number of children admitted to hospital for dental caries related tooth extractions.

Most agreed, however, that changes to the levy should form part of a cohesive cross-government obesity strategy, that includes measures targeting foods high in saturated fat, sugar, and salt (HFSS), if more significant health benefits were to be gained.

One respondent summarised these views on needing wider efforts to curb obesity in the UK, commenting:

“To maximise its effectiveness, the SDIL should be implemented as part of a cohesive cross-government obesity strategy that takes a multi-faceted approach across all 3 tiers of prevention. This includes consideration of other contributors to the obesogenic environment such as the affordability, availability and advertising of high fat, sugar, and salt products and ultra-processed foods.”

Responses from academics

These respondents were strongly supportive of reducing the threshold, and the overall objective of strengthening the levy. One respondent commented:

“Corrective taxes like the SDIL can create win-win outcomes. Unlike conventional taxes, they do not face the standard trade-off between market distortion and revenue generation. The SDIL ideally prompts reformulation towards healthier products. When manufacturers choose not to reformulate; higher prices still reduce consumption whilst raising revenue. Both outcomes advance public health objectives and the proposed modifications should be embraced.”

However, although they supported lowering the threshold, some respondents considered introducing a higher threshold of 10g per 100ml, and including drinks made ‘on-site’ in cafés and coffee shops, would be a more effective way of strengthening the levy and improving health outcomes.

Responses from trade associations

Respondents were strongly opposed to changes to the 5g threshold. They highlighted the economic and operational impacts on member businesses, and increased consumer prices as likely consequences of a lowering of the threshold to 4g total sugar per 100ml. Concerns were also raised about the impacts the changes could have on investment opportunities and employment growth in the soft drinks sector.

Responses from soft drinks, milk-based drinks and milk substitute drinks producers

These respondents all expressed concerns of the feasibility of further reformulation, claiming that most products between 4g and 5 g are already at the limit of what is technically possible and there are issues around consumer acceptability. One respondent commented:

“In addition to the technical challenges, consumer acceptance also dictates how far we are able to go in terms of recipe changes. We do not have line of sight of being able to develop a product reducing 5g to 4g that consumers would deem acceptable. Theoretically the increase in SDIL would be passed on to the consumer.”

On reformulation timelines, respondents estimated at least 2 years for carbonated soft drinks and the same for milk-based drinks. There was support in the dairy industry for an incremental reduction over a longer period to reflect the time that traditional soft drinks have had to reformulate (since 2016). One respondent commented:

“Reformulation typically takes several years. Accelerating this process would increase the risk of consumer rejection.”

These respondents also commented that the industry is under other financial pressures from government initiatives, such as the reform of the Packaging Recovery Note system that occurred in January 2025, changes to Extended Producer Responsibility, and the Deposit Return Scheme which is due to be introduced in 2027. One commented:

“The proposed timing of changes in 2027 coincides with the implementation of

the Deposit Returns Scheme (DRS). In an economic environment where wages are increasing, and input cost inflation remains high, companies are concerned that they will struggle to find the investment required to make DRS work and undertake further complex product reformulation at the same time.”

Several respondents agreed that potentially more impactful gains would be achieved by targeting other high sugar food categories. One commented:

“When soft drinks make up just 6.3% of sugar intake but are taxed far more heavily than chocolate, while cakes and some biscuits aren’t taxed at all, the government would be incentivising consumers to switch to other sugary products whilst missing fairer and more impactful ways to tackle excess sugar.”

Responses from individuals

There were some responses from individuals on the proposed threshold change. Those that did respond expressed concern about the impact of a lower threshold on consumer choice, the potential increase in prices, the widespread use of artificial sweeteners to replace sugar and how an increased exposure to sweeteners could impact an individual’s health.

The government’s response

Reducing the threshold at which the SDIL applies from 5g to 4.5g sugar per 100ml.

The government has carefully considered the responses to the consultation and has taken several factors into consideration when determining whether, and how far, to lower the threshold at which the SDIL applies.

In particular, the government has carefully considered industry concerns regarding the technical challenges of further reformulation, as well as the associated costs and risks of this reformulation for businesses, with consequences for wider business investment in the UK. The government remains committed to supporting growth and investment within the soft drinks sector, which currently provides approximately 120,000 jobs across the UK.

However, the government must also consider the scale of the challenge obesity poses in this country, and the health and economic burdens it brings. We are committed to tackling the obesity epidemic that places a £11.4bn a year burden on the NHS and even small adjustments, when adopted widely, can have a substantial impact at the population level. The government has also taken account of the historic evidence of significant reformulation in the industry, and the representations from some producers signalling that further reformulation is possible.

On balance, it remains the government’s position that there is room to go further to reduce sugar consumed from soft drinks, and that SDIL is a tried and tested method of encouraging this reformulation.

The government trusts that the upcoming movement of the lower SDIL threshold to 4.5g sugar per 100ml, rather than the previously proposed 4g sugar per 100ml, will not only reduce the reformulation burden on producers, but set a deliverable target for sugar reductions in the small, but important, 11% of soft drinks sales that contain 4.5g to 4.9g of sugar (estimate based on DHSC data). The government also believes that extending the implementation date to January 2028 will allow sufficient time for this reformulation to take place.

This strikes an appropriate balance between strengthening SDIL to drive further sugar reductions, whilst recognising and accounting for the challenges for industry.

The further reformulation of soft drinks

The government is reminded of the reformulation estimates made following the announcement of the SDIL in 2016 and how the industry went much further and faster than predicted, resulting in significant revisions to revenue forecasts. For example, in the first year of the levy’s operation, SDIL receipts were £240 million, less than the forecast of £520 million. This was a result of the reduced number of drinks in scope due to reformulation below the 5g total sugar per 100ml threshold before the introduction of the levy in 2018.

Extensive reformulation between 2015 and 2019

A BMC Medicine report showed that reformulation led to a decline in the total amount of sugar sold in soft drinks in the UK of 30% between 2015 and 2018, and the average sugar content of soft drinks fell from 4.4g per 100ml to 2.9g per 100ml over the same period. A similar study by the Institute for Government suggested the total sugar sold in soft drinks by retailers and manufacturers decreased by 35.4% between 2015 and 2019 and over the same period, the average sugar content of soft drinks declined by 43.7%, from 5.7g per 100ml to 2.2g per 100ml.

A study of the sugar levels of soft drinks available from UK supermarket websites found that the percentage of products (by number) above the 5g per 100ml threshold was 51.7% prior to the announcement of the levy in 2016. In February 2019 the percentage of products above 5g total sugar per 100ml fell by 33.8 percentage points to 17.9% indicating widespread reformulation of products following the announcement and implementation of the SDIL. In total, this implies 65% of the soft drinks above the lower SDIL threshold in 2015 became out of scope of the tax, within 3 years.

The government’s reformulation assumption

In their responses to the consultation, some members of the soft drink industry signalled the difficulty of further reformulation to 4g total sugar per 100ml. The difficulties of reformulating milk-based and milk substitute drinks were also emphasised. However, given the evidence of reformulation within the industry since 2016, the signalled intention of some respondents to reformulate, and the similar responses to SDIL’s introduction, the government expects that the soft drinks market will react similarly to the initial introduction of the SDIL.

The government recognises there will be technical challenges for industry in going further on reformulation below 5g total sugar by 100ml, and some soft drinks manufacturers who chose to reformulate following the initial introduction of SDIL may choose not to do so this time round. However, manufacturers will now need to reduce total sugar to just below 4.5g per 100ml, which is a smaller reduction in total sugar than was required compared to the original consultation proposal. For many soft drinks, it is also a smaller reduction to total sugar levels than was required when SDIL was first introduced. For example, a soft drink which currently has 4.9g total sugar per 100ml would need a 10.2% reduction in total sugar to reformulate to 4.4g per 100ml. As the evidence on reformulation set out above shows, greater reductions have already been achieved by industry.

Many businesses now have experience and expertise which may support further reformulation attempts. The government therefore believes it is a reasonable central assumption that 65% of soft drink sales brought into scope of the levy will reformulate to below the lower threshold to avoid being liable for it.

A cross-government obesity strategy

The government recognises that a broad section of respondents commented about how SDIL should form part of a wider strategy that covers food as well as soft drinks. However, there are also significant practical difficulties of encouraging reformulation more widely across food through the tax system. The government will continue to work with the food industry to encourage further food and drink reformulation to help tackle obesity, in a way that protects consumers and is focused on voluntary and regulatory measures.

As part of the 10 Year Health Plan for England, the government has announced its intention to mandate all large food businesses to report against standardised metrics on healthier food sales by the end of this Parliament. This will ensure greater transparency and accountability, inform consumers and investors and encourage retailers to sell healthier products.

The 10 Year Health Plan also stated that government will fulfil its manifesto commitments to restrict junk food advertising targeted at children, ban the sale of high-caffeine energy drinks to under-16-year-old and give councils stronger powers to block new fast-food outlets near schools. It announced that school food standards legislation will be updated, that the government would implement measures to support the poorest families and to update the standards used to support obesity legislation.

This is in addition to existing obesity policies on price and locations promotions and the mandatory provision of calories on menus in out of home settings.

3. The treatment of milk-based drinks (questions 13 to 23)

Summary

Responses to the questions in this section were divided, with strong support from public health organisations and academics for the removal of the milk-based drinks exemption, but equally strong opposition from the dairy industry, major producers and trade bodies. However, the majority of respondents agreed that should the exemption be removed, an ‘allowance’ for sugars present in lactose in milk-based drinks should be introduced. Respondents were agreed that the proposal in the consultation on how lactose should be accounted for would not provide the fairest outcome in practice and provided alternative methodologies.

Responses from producers of milk-based drinks and representatives of the dairy industry

All milk-based drinks producers provided responses to the question that focussed on reformulation challenges and the reduction in added sugar in milk-based drinks. There was concern that reducing added sugar would compromise taste, leading to consumer rejection. Respondents stated that reformulated products (where sugar reduction impacts mouthfeel, viscosity and texture) often fail taste tests or are rejected by retailers and consumers.

Respondents also cited that reformulation cost and investment burdens that would unfairly impact small and medium sized business and divert investment from further product development. Producers were agreed that a minimum of 2 years, assisted by a phased approach, would be necessary if reformulation was to be fully tested. One respondent commented:

“Reformulating milk-based drinks is not just about reducing sugar; it requires a holistic approach to product development.”

Some producers supported the different treatment of fermented milk (yoghurt) drinks in the SDIL. They suggested that these drinks should not be in scope as they have a higher nutritional value, a different composition, and they are consumed in a different way by a different demographic. One respondent suggested the removal of the exemption for milk-based drinks with added sugar be accompanied by clear guidelines on what constitutes a ‘soft drink’ to remove any doubt around the future treatment of these drinks:

“Taxing [yoghurt drinks] as beverages would create a format-based penalty rather than a nutrition-based policy, undermining both public health goals and regulatory consistency.”

From a regulatory perspective, producers commented that inclusion in SDIL would create inconsistency between the regulations on High (Saturated) Fat, Salt and Sugar (HFSS) where many yogurt-based drink products are classified as ‘non-HFSS’ under the Nutrient Profiling Model.

Producers of dissolvable powders who commented opposed their inclusion in the scope of this consultation, considering this to be an expansion of the levy’s scope without the necessary analysis being completed. One commented:

“[If] a robust case can be presented for their inclusion based on the sugar intake from these products and the potential benefit of their inclusion, there should be a consultation to specify how lactose allowance should be calculated based on the dry milk components content, and other details.”

There was a broad and mixed reaction to the proposal of a lactose allowance from respondents. There was little support for the proposed method of determining the lactose content by multiplying the percentage of liquid milk by 4.8g (the average lactose content of semi-skimmed milk). Respondents who commented all agreed on the principle of an allowance, but suggested the proposed method is too rigid and fails to reflect variations in lactose levels across different types of milk and different times of the year, as well as failing to account for lactose in non-liquid milk ingredients such as milk powder.  

Respondents proposed constructive alternatives to the proposed method of calculation for lactose. The most common proposal was that the industry should ‘self-report’ only sugar added to their products using the definition of ‘added sugar’ from EU Regulation 1924/2006. One respondent commented:

“Added sugar should be self-reported by dairy companies and used against the policy sugar thresholds. This aligns with scientific evidence that lactose is of no health concern.”

When considering what mechanisms to put in place to ensure consistent application of the allowance, respondents suggested using regulatory audits and spot-checks and government-led education and support, underpinned with laboratory product testing if necessary. One respondent commented:

“Allowing verified lab data would ensure greater accuracy and fairness.”

There was a mixed response on the question of retaining a minimum milk content of 75% (75ml of milk per 100ml of drink) for a product to qualify for a lactose allowance. Some saw it as a way of ensuring only genuinely milk-based drinks benefit. However, one producer questioned the need for applying a lower limit to the allowance, suggesting it would be inconsistent with the principle of an allowance which recognises the overall nutritional benefits of any milk in these drinks (regardless of the % milk content).

Responses from health academics, public health associations and individuals

Health associations and academics who responded to questions in this section all noted that milk-based drinks with added sugar contribute significantly to free sugar intake, especially among children and adolescents. They noted that removing the exemption would align with NHS and Scientific Advisory Committee on Nutrition (SACN) guidance, whilst supporting sugar reduction goals. One respondent commented:

“Removing the exemption would create a level playing field and support reformulation.”

They all agreed that the exemption for milk-based drinks with added sugar should be removed. Most supported the proposal for a lactose allowance of some kind, although there was little support for the method proposed in the consultation being judged as lacking clarity. Respondents proposed that the method should be designed in conjunction with the dairy industry to ensure a transparent and evidence-based solution that would be consistently applied.

In response to the question on the inclusion of fermented milk (yoghurt) drinks, health academics were in support of the inclusion of these drinks due to high sugar content, the risk of overconsumption due to the drinkable format, and the fact that the probiotic benefits were unlikely to outweigh the harm from the sugars.

Many respondents across the health sector agreed that a drink should have a minimum 75% milk content to qualify for an allowance. However, some respondents acknowledged that as a large proportion of flavoured milk drinks on the market with over 90% milk content are high in added sugar, setting a minimum milk content of 75% would not be effective in driving a reduction in sugar content

There were few public health body responses on reformulation challenges. However, of those responses received there was recognition that these drinks were reformulated to some extent under the Department of Health’s and Social Care (DHSC)’s voluntary Sugar Reduction Programme, indicating that reformulation was possible. In addition, one respondent listed a number of low / no sugar milk drinks currently available that would fall below the SDIL threshold, demonstrating that it is possible to produce milk-based drinks with a sugar content in this threshold. Some respondents expressed caution about the use of non-sugar sweeteners (NSS) to replace sugar and that any reformulation should not over-rely on the use of NSS.

“Alternative strategies [to reformulation] – like gradually lowering sweetness or using non-sweet ingredients – should be explored.’

Individuals were broadly in favour of including dissolvable powders in scope of the SDIL due to their high sugar content and considered it a natural extension of the Soft Drinks Industry Levy. Health associations were also supportive of the inclusion of dissolvable powders with several commenting:

“Voluntary measures [for powdered drink sugar reduction] have been inconsistent and not widely adopted, supporting the need for mandatory fiscal levers like SDIL.”

The government’s response

The government has carefully considered all representations and consultation responses on the treatment of milk based drinks with added sugar and recognises that the producers of these drinks would prefer the exemption to remain in place. However, bringing these drinks into SDIL will introduce a tax incentive for manufacturers to reduce sugar in their recipes and support the government’s long-term health objectives on obesity.

The government also considers that removing this exemption will level the playing field between these drinks and traditional soft drinks. Therefore, the exemption will be removed. Alongside this a ‘lactose allowance’ will be introduced to account for the naturally occurring lactose in milk and other milk products in these drinks, when calculating liability to the levy.

Government dietary advice is based on robust evidence-based conclusions and recommendations from the Scientific Advisory Committee on Nutrition (SACN). In its Carbohydrates and Health report 2015, SACN recommended that sugar intakes should be assessed in relation to free sugars. In the report, free sugars were defined as ‘all monosaccharides and disaccharides added to foods by the manufacturer, cook or consumer, plus sugars naturally present in honey, syrups and unsweetened fruit juices. Under this definition lactose when naturally present in milk and milk products is excluded.’ In 2018, government set out how to apply this definition. For the purposes of this policy, the following are considered to be free sugars:

• all sugars naturally present in fruit and vegetable juices 
• purées and pastes and similar products in which the sugar structure has been broken down 
• all sugars in drinks (except for lactose in dairy-based drinks) 
• lactose and galactose added as ingredients, including whey powder

To confirm, plain animal milks and milk-based drinks with no added sugar are not in scope of SDIL and this will remain the position going forward.

The reformulation of milk-based drinks

The government has considered the consultation responses describing the challenges presented by reformulating milk-based drinks to reduce sugar content and notes the view that caution should be exercised on the use of non-sugar sweeteners. The government also acknowledges milk-based drinks manufacturers responded positively to the voluntary Sugar Reduction Programme. Data from the most recent progress report showing the reduction in the sales weighted average sugar per 100ml of 32.4% between 2017 and 2024 show that reformulation of milk-based drinks is possible.

The report also shows that pre-packaged fermented milk (yoghurt) drinks, data from the most recent sugar progress report showed a reduction in the sales weighted average (SWA) sugar content per 100ml of 15.2% in these drinks between 2017 and 2024. This is against a voluntary SWA target of a 20% reduction for both pre-packaged milk based and fermented milk (yoghurt) drinks.

Therefore, whilst recognising the challenge involved and the progress made towards the targets set by the Sugar Reduction Programme, the government expects that producers will further reduce the free sugars in milk-based drinks through reformulation. The government’s decision to change the threshold to 4.5g per 100ml, rather than 4g per 100ml, also reduces the ask on industry.

The ‘lactose allowance’ and its application under the levy

To reflect that SACN excludes naturally occurring lactose in milk and dairy products from its definition of free sugars and that dietary advice is based on the evidence on free sugars, the government consulted on proposals to include a ‘lactose allowance’ for milk-based drinks. The government proposed this should be based on liquid milk content. This would be applied when calculating the liability of a drink against the SDIL threshold. To calculate a specific drink’s lactose allowance, the consultation proposed that the taxpayer would multiply 4.8g (the average lactose content of semi-skimmed milk) by the percentage milk content of the drink in question. For example, a drink containing 75% milk would get an allowance of 4.8g x 75% = 3.6g per 100ml. This allowance would then be added on to the relevant SDIL thresholds, so a milk-based drink would only become liable to pay the SDIL if its total sugars exceeded the SDIL lower threshold, plus its bespoke lactose allowance.

Considering responses to the consultation and extensive detailed discussions with dairy representative bodies and producers of milk-based drinks, the government agrees that the consultation proposal fails to allow for other milk products such as milk powder which contribute to the lactose present in milk-based drinks. The government has therefore made changes to how the lactose allowance will be calculated – as set out below.

The lactose allowance for milk-based drinks will apply to drinks irrespective of their percentage milk content. The government notes suggestions that there should be a minimum milk content for a drink to qualify for a lactose allowance, to ensure only drinks with over, for instance, 75% milk benefit from the allowance. However, consistent with the government’s intention to encourage producers to reduce only the free sugars in drinks, the allowance has been designed to capture lactose even when present only in small quantities. This ensures all milk-based drinks benefit from the allowance, albeit to different degrees depending on the lactose present.

How the lactose allowance for milk-based drinks will be calculated

As with the initial consultation proposal, the aim remains to determine liability for milk-based drinks only after allowing for lactose. A drink will be liable to pay the SDIL if, after its bespoke lactose allowance has been determined and deducted from total sugars, its remaining sugars exceed the lower SDIL threshold.

Producers will calculate, based on their product recipes, how much lactose is derived from each ingredient. All lactose from allowable sources will be added up to give the product’s bespoke lactose allowance. Producers will then deduct this allowance from the drink’s total sugars to determine liability, based on the remaining sugars.

No lactose allowance will be given for sugars from the following non-allowable sources:

• lactose added as an additional ingredient
• lactose contained in whey powder
• all sugars in lactose free dairy products where the lactose has been broken down to glucose and galactose through the addition of lactase (hydrolysed lactose)

This is based on current guidance from health experts that lactose should, in the above cases, be treated as free sugars. See section below on the specific considerations given to hydrolysed lactose.

All other sources of lactose will be allowable, and sugars from these sources can be counted towards a drink’s bespoke lactose allowance. This is to give clarity to producers, based on current health evidence, to support them in reformulating products. The government acknowledges that the view of health experts on specific milk-derived ingredients may change in coming years such that this position could fall out of step with the latest evidence. Whilst the government will review new evidence as it arises, any such developments would be considered in light of the government’s commitment not to make any further changes to SDIL this Parliament.

Where required, evidence of the calculation would be provided using a ‘recipe sheet’ setting out the total sugars present in the drink. This would require the producer to provide a full breakdown of the total sugar content of a drink, including its lactose content (and the ingredients from which this lactose was derived). This requirement would form part of any future compliance activity, and producers will be called upon to provide this breakdown on a product-by-product basis. A final decision on whether a specific record keeping requirement is needed will be made in consultation with stakeholders, and there will be opportunity to feedback on this requirement in the technical consultation on draft legislation.

In some cases, following the provision of a recipe sheet, HMRC may require a test for the lactose content. However, at the request of stakeholders during the consultation process, this policy has been designed to keep the requirement for lactose testing to a minimum.

The treatment of hydrolysed lactose

Hydrolysed lactose is lactose that has been broken down into its simpler components, glucose and galactose, through the process of hydrolysis. This process is often used to create lactose-free dairy products and can also be added to provide additional sweetness to drinks.

Within SDIL, hydrolysed lactose will be treated as a free sugar and therefore will contribute towards the ‘total sugar’ content of milk-based or milk-substitute drinks. The treatment of hydrolysed lactose as a free sugar within the SDIL is based upon the official DHSC position on these drinks. We expect SACN to publish guidance consistent with their recent meeting notes setting out this position in due course.

Lactose free milks without added sugar will remain excluded from the levy. This follows the general approach – as in current SDIL legislation – that drinks without added sugar are out of scope of the levy. As covered below, a similar approach will be taken with the treatment of milk substitute drinks without added sugar. This ensures consistent treatment between plain animal milks (including lactose free milks) and plant alternatives.

The treatment of fermented milk (yoghurt) drinks

The consultation responses showed opposition from producers to including fermented milk (yoghurt) drinks in the SDIL. This is because businesses consider these drinks to be of a higher nutritional value and having a different composition to other milk-based drinks. They also stated that these drinks differ in how they are consumed and who consumes them. They also suggest that the composition of some products is identical to yoghurts that can be eaten with a spoon. Health academics had an opposing view, supporting their inclusion in the levy based on the higher sugar content of some drinks and the lack of evidence that their probiotic qualities outweigh the negative implications of their high sugar content. The government has considered these views, and the product examples provided.

On the distinction between yoghurt drinks and yoghurts to be consumed with a spoon, in addition to there being clear differences in ingredients in the examples provided, and with reference to industry codes of practice, the government considers there is a logical boundary within the levy between yoghurt that is eaten (including ‘drinking yoghurt’) and those that are yoghurt drinks. Therefore, to ensure fairness and consistency in the removal of the exemption and to incentivise producers to reduce the amounts of free sugar in some of these products, fermented milk (yoghurt) drinks will be included in the scope of the levy once the exemption for milk-based drinks is removed. This includes but is not limited to yoghurt drinks, lassis, kefirs, drinks with disease risk reduction claims (including plant stanols and sterols), and pre and probiotic drinks (including those with functional health claims). Yogurt that is eaten (including ‘drinking yoghurt’) will not come into the scope of the levy.

Dissolvable powders

The government has considered the responses on dissolvable powders. It has also considered the significant redesign of the levy necessary to include them. This is considered to be beyond the remit of the SDIL review, as set out by the Chancellor at Autumn Budget 2024.

4. The treatment of milk substitute drinks (questions 24 to 30)

Summary

Responses to these questions were provided by producers of these drinks, a few individuals and all public health associations. Producers, supported by trade bodies, were in general opposition to removing the exemption; a mixed response from individuals; and public health associations all advocated for the removal of the exemption. All respondents agreed that as proposed, unsweetened varieties of milk substitute drinks should be excluded. However, manufacturers wanted this to be extended to include an allowance for the natural sugars released from plant-based ingredients even if the drink contains added sugar.

Responses from milk substitute and plant-based drinks producers, and trade bodies

The number of responses to this section of the consultation reflects the small number of producers of milk substitute (or ‘plant-based’) drinks affected by these proposals. There was a mixed response that showed support for the government’s health aims to reduce added sugar in such drinks but general opposition to removing this exemption (as well as the milk-based drinks exemption) based on the suggested benefits of these drinks compared to carbonated soft drinks.

Emphasis was placed by respondents on maintaining a parity of tax treatment between milk and unsweetened milk substitute drinks so that the consumers of these drinks were not unfairly penalised. Respondents agreed this could be achieved by leaving unsweetened drinks out of scope, or by providing an allowance for naturally occurring sugars in milk substitute drinks.

Some respondents also highlighted that under the current proposals, a plant-based drink may contain the same total sugar as a dairy equivalent but be liable to the levy where the equivalent would not be, due to the absence of an allowance for inherent sugars. One respondent commented:

“Equitable treatment would uphold the principle of parity, support inclusive dietary needs, and align with the broader public health goal of encouraging healthier choices across all consumer groups.”

Respondents suggested that one way of ensuring parity would be to introduce an allowance for plant sugars along the lines of the ‘lactose allowance’ so that liability would be determined only with reference to the non-plant sugars in a drink.

Although the risk was acknowledged, producers were confident that removing the exemption for these drinks would not change their approach to these products being fortified with calcium and other vitamins, as the industry is committed to fortification as a core proposition in this type of drink.

The proposal that sugars derived from the principal or ‘core’ ingredient would be excluded from the definition of ‘added sugars’ in SDIL legislation was widely accepted by respondents as a practical and appropriate way to keep milk substitute drinks without added sugar out of scope of the levy. In response to the question about the proposed language used, one respondent suggested adopting the definition of ‘primary ingredient’ from EU Regulation 1169/2011 to ensure regulatory consistency and clarity of definition for producers.

Trade bodies and producers both commented that reformulation of these drinks would be challenging. They also raised concerns about consumer acceptance of reformulated products. Respondents were cautious about using non-sugar sweeteners (NSS) to replace sugar in drinks and suggested that an incremental reduction in the threshold over a longer timeframe might help with product reformulation. Producers anticipated timelines to reformulate were up to 36 months.

Responses from health academics, public health associations and individuals

Health academics and public health associations were unanimous in their support for the removal of the SDIL exemption for milk substitute drinks with added sugar. One commented:

“Removing the SDIL exemption for milk substitute drinks with added sugar would encourage further shifts towards reformulation, whilst ensuring parity with the treatment of milk-based drinks with added sugar.”

A small number of individuals who did not agree with removing the exemption expressed concerns of potential cost increases to these milk substitute products and the risk of a rise in the use of NSS to replace the sugar.

Most respondents agreed that unsweetened milk substitute drinks should remain exempt from the levy so that consumers who have a lactose intolerance or allergy to cow’s milk are not unfairly penalised. Health associations also suggested that any decisions on this proposal should be aligned with the plant-based sugar recommendations in SACN’s 2025 carbohydrates and health report. However, caution was advised by some health associations that sugars derived from the principal ingredients of plant-based milks are free sugars and contribute to obesity, dental decay and wider food-related ill health in the same way as added sugar.

A small number of respondents identified a risk that removing the calcium content condition as part of the proposal to remove the milk substitute drink exemption could reduce fortification. However, the majority of respondents agreed that there was little evidence to suggest that this would be a consequence of removing the exemption given the prevalence of calcium fortification as a core proposition in these drinks. One respondent commented:

“We believe that the wider operating conditions for producers of plant-based drinks will continue to drive fortification, and changes to the SDIL would not be likely to change this.”

The government’s response

Having carefully considered all responses, the government will remove the current exemption which applies to all milk substitute drinks with a minimum calcium content of 120mg, irrespective of their sugar content. Alongside this, the government will ensure that drinks with sugars only released from their principal, or ‘core’, ingredient will be out of scope of SDIL, on the basis that they do not have added sugar. This will maintain consistency of treatment between milk substitute drinks without added sugar and plain animal milks – both of which will be excluded from the scope of the SDIL – whilst bringing into SDIL milk substitutes with added sugar, including the flavoured varieties that could be consumed as alternatives to flavoured milk-based drinks.

This approach is also consistent with UK dietary guidelines. These advise that unsweetened, calcium-fortified milk substitute drinks, made from plants like soya, almond or oats, which count as part of the ‘milk and dairy’ group in the Eatwell Guide, can make good alternatives to dairy products. These drinks can also be given to children from one year old as part of a healthy balanced diet. Unsweetened fortified milk substitute drinks also provide an option for people who cannot or choose not to consume cows’ milk because of allergies, religious or ethical reasons.

Allowance for sugars released from the core or principal ingredient

The government recognises that some milk substitute drinks, such as rice or oat drinks, contain sugars that are released during the manufacturing process. To continue to keep these drinks outside of the levy, sugars derived from the principal or ‘core’ ingredient, such as oats in ‘oat milk’ (meaning those naturally present or released during manufacturing) will be excluded from the definition of added sugars in SDIL legislation. 

Some respondents suggested that there should be an ‘allowance’ for sugars derived from the principal ingredient even if sugar were added to mirror the allowance given for sugars that are present in lactose in milk-based drinks. SACN’s definition of free sugars excludes naturally occurring lactose in milk and dairy products. As dietary advice is based on the evidence of free sugars intake, providing an allowance in sweetened plant-based drinks would not align with the free sugars definition. There will be no allowance for the principal ingredient where other sugars are present. Other sugars will include sugars from a second or further plant-based ingredient.

Therefore, if any sugars (whether for sweetening or otherwise) other than the principal ingredient are added to a milk substitute drink, the SDIL thresholds will apply, based on total sugar content (g) per 100ml. Total sugars include those naturally present or released by the principal ingredient during manufacturing, plus added sugars. This is consistent with the current treatment of fruit juice with added sugar.

Calcium content in milk substitute drinks

The current milk substitute exemption includes a minimum calcium content requirement of 120mg per 100ml. The government will remove the current milk substitute exemption and bring milk substitutes (flavoured or plain) with added sugar into SDIL. Based on the consultation responses the government is confident that removing the exemption will not lead to a reduction of calcium fortification in milk substitute drinks given that fortification is a ‘core proposition’ of plant-based drinks.

5. Other issues raised in the consultation and the government’s response

The potential impact on trade between Northern Ireland and the Republic of Ireland

Two respondents representing a number of businesses expressed concern that changes to SDIL and subsequent ‘regulatory divergence’ between the SDIL and Republic of Ireland’s ‘Sugar Sweetened Drinks Tax’ (SSDT) could potentially have an impact on trade between Ireland and Northern Ireland; this is due to an ‘all island’ approach to trade adopted by many businesses in the soft drinks industry.

The government’s response

The government recognises the importance of minimising the impact of changes to the SDIL on trade with the island of Ireland. Both SDIL and the SSDT apply tiered rates determined by sugar content. While some elements of the 2 regimes do currently align, there are also differences, such as the rates at which the taxes are charged, and how the calcium content condition applies across all milk-based and milk substitute drinks.

The proposed changes to the UK SDIL may result in further differences for certain liable soft drinks between Northern Ireland and the Republic of Ireland. However, the impact of these differences will depend on how businesses operating across the island of Ireland structure their financial and operational models in response to legislative changes both in terms of pricing structures and decisions about reformulating products. 

The government has considered compliance issues that may result from these changes. HMRC adopts a risk-based compliance strategy, which combines education and guidance for businesses with targeted interventions where non-compliance is suspected. Compliance strategies are continuously reviewed to adapt to changes or where there might be emerging or new risks. This approach is designed to maintain a level playing field, protect revenue, and support the public health objectives of the levy.

Growing up and toddler milks

Although the consultation did not ask a specific question on the subject, there were 15 responses from public health bodies that directly addressed ‘toddler milks’ or ‘growing-up milks’ in section 5 (the treatment of milk-based drinks). There was concern that if these drinks were not in scope of the SDIL then there would be a missed opportunity to encourage reformulation and lower the added sugar content of these products.

The government’s response

The government does not consider the SDIL to be an appropriate lever with which to address the concerns raised and therefore will not be bringing toddler milks into the levy. The government notes that many of these products are sold in powdered form, meaning that, even if the SDIL were applied to toddler milks, only a minority of the category would be in scope, and even fewer would be liable to pay the tax after accounting for lactose. Irrespective of its decision on SDIL, the government accepts the recommendation from SACN that formula milk including infant formula, follow-on formula or other toddler milks are not required by children aged 1 to 5 years.

The increase in the use of non-sugar sweeteners

Concerns were raised about increased use of NSS under the SDIL proposals. 59 responses were received collectively from individuals, health organisations and industry highlighting concerns about the use of NSS. Individuals were concerned with the long-term health impact of consuming NSS and their taste. Health organisations cited SACN and World Health Organization (WHO) guidance recommending limited use of NSS. Industry highlighted challenges with consumer acceptance of NSS and the difficulty with reformulating products to remain SDIL compliant.

The government’s response

All NSS used in the UK undergo a rigorous safety assessment before they can be used in food and drink. UK legislation also dictates the maximum amount of NSS that can be used by businesses and in which products, along with any specific conditions of use.

On 2 April 2025 SACN published a position statement on the WHO guideline on non-sugar sweeteners. SACN concluded that the evidence of a risk to health from consuming NSS is inconsistent. SACN made a precautionary recommendation that intake of NSS be minimised. However, given there is much greater certainty of the impact of sugars on health, SACN recommended that “swapping sugars for NSS may help reduce sugar intake from foods and drinks (and so reduce energy intake), at least in the short term. The long-term goal is to limit both sugar and NSS intake.

The Department for Health and Social Care and Food Standards Agency are considering options for, and developing potential approaches to, improving monitoring of intakes of non-sugar sweeteners through the National Diet and Nutrition Survey (NDNS).

It is ultimately up to businesses to decide if and to what extent to use sweeteners in their products, where these are permitted. Some choose not to use sweeteners, even when permitted to do so, for reasons around consumer acceptance.

Allergy to non-sugar sweeteners

Fourteen respondents highlighted adverse effects such as digestive issues and migraines linked to sweeteners. Some respondents noted that the proposals could eliminate access to suitable soft drinks, including milk-based alternatives. One respondent also raised concerns about unclear product labelling, making it difficult to identify sweetener content.

The government’s response

The changes to SDIL are designed to encourage reformulation of drinks currently with between 4.5g to 4.9g sugar per 100ml and those milk-based and milk substitute drinks newly brought into scope. The policy changes will have no impact on the sugary drinks that currently pay the levy. The government therefore expects there will continue to be a range of drinks available for consumers, including those with higher sugar levels and no artificial sweeteners, as there has been since SDIL’s introduction.

All sweeteners used in food and drink are required to be declared in the ingredient list. Of particular concern for people with phenylketonuria, products that contain aspartame, also known as E95, will also have a separate warning on the product label that it contains a source of phenylalanine.

Sensory sensitivity autism and Avoidant/Restrictive Food Intake Disorder

Two individuals raised concerns that switching to alternative drinks or brands is often not feasible for people with autism due to sensory sensitivities and rigid food routines. One individual raised concerns that for people with Avoidant/Restrictive Food Intake Disorder (ARFID), changes in taste and texture resulting from reformulation can make previously tolerable drinks unacceptable and switching to alternative products is often not feasible and can take years to achieve.

The government’s response

The SDIL is designed as a broad public health measure to benefit the general population and only applies to a narrow section of the soft drinks market. The government recognises that there are specific groups or individuals who may be impacted differently by the changes made to products in scope but cannot comment on the specific health issues raised through these consultation responses.

Availability of high sugar drinks for consumers with diabetes

Fifteen individuals commented on the proposed changes potential effect on consumers with diabetes. Concerns were raised about the availability of sugary drinks for individuals during hypo-glycaemic episodes.

The government’s response

These changes to SDIL are designed to encourage reformulation of drinks currently with between 4.5g to 4.9g sugar per 100ml and those milk-based and milk substitute drinks newly brought into scope. The policy changes will have no impact on the sugary drinks that currently pay SDIL. The government therefore expects there will continue to be a range of drinks available for consumers, including those with higher sugar levels, as there has been since SDIL’s introduction.

6. Assessment of impacts

Exchequer impact (£m)

The changes to SDIL here are, following their introduction on 1 January 2028, expected to raise £40 million to £45 million a year in additional tax receipts. This revenue will be scored at Autumn Budget 2025 and a costing note will be published.

Economic impact

This measure is not expected to have any significant macroeconomic impacts – on the basis that the levy is limited to soft drinks, and an estimated 11% of UK soft drink sales are affected. We would expect producers of soft drinks affected by the new minimum sugar threshold to reformulate their product mix by lowering sugar content, promoting lower sugar alternatives, and reducing portion sizes. There would also be a behavioural response resulting from any change to the associated prices. The direct impact of the proposed changes on CPI inflation is expected to be negligible (an impact of less than 0.02 percentage points).

Impact on individuals and households

This measure will indirectly impact all individuals that consume soft drinks, milk-based and substitute milk-based drinks that may become subject to SDIL.

The tax on these products may increase if the producers decide not to reformulate their drinks. This could in turn lead to price increases, if producers pass the levy on to customers. The government would expect this to effect only 35% of the drinks newly brought into scope of the levy (11% of sales), with most drinks reducing sugar to avoid the tax. Therefore after accounting for reformulation, the government estimates that only an additional4% of soft drinks sales will pay SDIL as a result of these changes.

This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change doesn’t directly impact them.

Equalities impacts

An individual may be affected by this measure regardless of their protected characteristics. If a protected group is overrepresented in this population, then it will be disproportionately impacted. HMRC does not currently hold data on the protected characteristics of individuals impacted by this proposal and so cannot determine conclusively if there are any equality impacts.

Impact on businesses and civil society organisations

This measure will have an impact on producers and importers of those drinks newly brought into the scope of the SDIL – as they may reformulate their product, face new tax liabilities and engage with new compliance processes. However, as this impact applies only to approximately 11% of soft drinks sales, most manufacturers have reformulated before, and have time to adjust, the government considers this impact to be proportionate.

The overwhelming majority of soft drinks are produced by large businesses. The smallest producers, producing less than a million litres a year, will remain exempt from the levy.

This measure may have an indirect effect on businesses in their supply chains. There are around 100 UK producers and importers of soft drinks that are not already registered for the SDIL, including those that make or sell milk-based and milk-substitute drinks. We expect the administrative impact of the measure to be negligible.

Businesses will incur one-off costs of familiarisation with the new rules and training for staff, registration with HMRC, and developing the required reporting framework to complete SDIL returns. There will also be continuing costs including completing, filing and paying quarterly returns, keeping appropriate records and amending returns. However, compliance should not be too challenging for most businesses.

It is expected that businesses will already keep most of these records as good business practice. Guidance on completing SDIL-related tasks has been available on GOV.UK since 2018 when the levy was first introduced. Reporting occurs through an easily accessible, fully digital online service.

This proposal is not expected to disproportionately impact on civil society organisations.

The indirect impact on supply chains – and dairy farmers in particular - is expected to be negligible. Milk-based drinks with added sugar are estimated to form less than 2% of the overall utilisation of British milk. Any demand or price impact as a consequence of the SDIL will therefore be minor. 

This measure is expected overall to impact businesses experience of dealing with HMRC since additional businesses will come into the scope of SDIL. HMRC has clear guidance regarding their obligations and has consulted with them before proposing these changes.

Impact on HMRC or other public sector delivery organisations

There is likely to be no/minimal impact as HMRC already administers the SDIL and any activity relating to non-compliance.

Other impacts

Other impacts have been considered and none have been identified.

7. Health Impacts assessment

Headlines

A diet high in sugar increases the risk of both dental caries and becoming overweight or living with obesity.

Tooth decay remains a leading cause of hospital admissions in children. Evidence indicates that children with obesity are 5 times more likely to have obesity in adulthood.

Obesity is linked to an increased risk of serious health conditions, including type 2 diabetes, cardiovascular disease, several cancers, and depression. This can lead to reduced working hours, reduced employment, and reduced ability to undertake unpaid work such as childcare.

As a result, obesity costs society £74.3 billion per year in the UK, encompassing reduced quality of life, sickness absence and NHS and social care costs. Within this obesity costs the NHS £11.4 billion per year, and costs businesses £8.9 billion per year in productivity losses.

The prevalence of childhood obesity remains a significant concern. In 2024 to 2025, nearly one in four children aged 4 to 5 years (23.5%) and over one in three aged 10 to 11 years (36.2%) are overweight or living with obesity.

Prevalence rates continue to increase. Excluding the pandemic peak, 2024 to 2025 has seen the highest obesity prevalence in reception since measurements began in 2006 to 2007. Increasing from 9.6% in 2023 to 2024 to 10.5% this year.

Obesity prevalence continues to be more than double in the most deprived communities compared to the least deprived for both reception (14.0% compared to 6.9%) and year 6 (29.3% compared to 13.5%), with the deprivation gap increasing over time.

Where the levy is successful in influencing behaviour and lowering consumption of high sugar drinks, positive health and economic outcomes are expected from reduced calorie intake in diets leading to a reduction in obesity related conditions.

DHSC analysis estimates per person per day calorie reductions of 0.3 kcal in 5 to 10 year olds, 0.4 kcal in 11 to 18 year olds, 0.3 kcal in 19 to 64 year olds, and 0.2 kcal in those 65 and over (equivalent to around 4 million kcal per day in children and 13 million kcal per day in adults) by:

1. reducing the lower sugar threshold to 4.5g per 100ml (currently at 5g per 100ml)
2. removing previous exemptions for milk-based and milk substitute drinks

Population-level policies aim to create a healthier food environment to reduce risk factors across the entire population rather than focusing on individual behaviour change. By targeting the whole population, modest calorie reductions can lead to significant long-term health and economic benefits. Whilst this approach estimates average calorie reductions and benefits at population level, benefits are expected to be greater in individuals where consumption is highest, or in those at higher risk of living with obesity.

These calorie reductions could achieve health and economic benefits of around £973 million over 25 years, including:

• reduced morbidity could result in reduced cost pressures to the NHS, resulting in NHS savings of £36 million
• wider health benefits to the population through improved quality of life (reduced mortality and premature morbidity) are estimated to be worth around £686 million
• social care savings could amount to £30 million
• reduced morbidity and premature mortality could be expected to deliver around £221 million economic output through additional labour force participation

The contribution to the calorie reduction from the 2 proposed changes to SDIL varies by age group, however, as an example for those aged 19 to 64 the contribution is:

1. 50% for reducing the lower sugar threshold
2. 50% for removing the previous exemptions for milk-based and milk substitute drinks

A calorie reduction of this scale could translate into reducing cases of adult obesity by almost 14,000 and childhood obesity by almost 1,000.

Methodology statement

Background

The Soft Drinks Industry Levy (SDIL) was announced in 2016 and implemented in 2018. It applies to manufacturers and importers of added sugar soft drinks that contain 5g total sugars per 100ml or more. The current SDIL bands and rates are:

• lower rate (18p per litre) applied to drinks with total sugar content between 5 grams (g) and up to (but not including) 8g per 100ml
• higher rate (24p per litre) applied to drinks with total sugar content equal to or greater than 8g per 100ml

No SDIL is applied to drinks containing less than 5g sugar per 100ml. Unsweetened juice and milk-based drinks (with at least 75% milk content) containing added sugar are not liable for the levy but are included in the UK’s voluntary sugar reduction programme (VSRP).

The most recent progress report shows that between 2015 and 2024 the sales weighted average sugar content per 100ml of drinks in scope of SDIL decreased by 47.4%.

New proposals to strengthen the SDIL include the following 2 measures:

1. reducing the lower sugar threshold to 4.5g per 100ml (currently at 5g per 100ml)
2. removing previous exemptions for milk-based and milk substitute drinks

Approach

These proposals are designed to encourage producers to reformulate their products to avoid the levy, thus reducing calories consumed from high sugar drinks. Where products are not reformulated, increased prices are expected to lead to reduced demand from consumers (who choose not to consume them or switch to lower calorie alternatives), similarly reducing calories consumed.

Where the SDIL is successful in influencing behaviour and lowering consumption of high sugar drinks, we expect positive health and economic outcomes from reduced calorie intake in diets.

DHSC have conducted analysis to estimate the calorie reduction from these proposals through reformulation and substitution to alternative drinks, and the subsequent health and economic benefits.

National Diet and Nutrition Survey (NDNS) data was used to calculate the average free sugar consumption from the products of interest. Worldpanel by Numerator (formerly Kantar WorldPanel) sales data was then used to isolate the proportion of free sugar sold that is in scope of being affected by the new proposals. Together these were used to estimate the total amount of sugar which could be removed from diets.

Assumptions for reformulation and substitution were then applied to estimate the sugar reduction following implementation of the proposals. This sugar reduction was converted into calories and Calorie Model v4.2 was used to estimate the health and economic benefits from the calorie reduction.

Finally, the DHSC BMI Prevalence Model has been used to simulate the change in obesity prevalence from this change in calorie intake at population level.

Data sources

Tables 5.11a and 5.23 from National Diet and Nutrition Survey 2023 – cross-sectional survey data on food consumption and nutritional intake.

Internal extracts of Worldpanel by Numerator (formerly Kantar’s Worldpanel) sales data from Take Home Dataset 2024 – data on take-home sales and nutritional values of grocery products.

Assumptions

The following key assumptions were agreed in collaboration between DHSC, HMRC and HMT.

Reformulation

It is assumed that 65% of products brought into scope of the SDIL will reformulate to sales weighted sugar levels in the 5g band directly below the new sugar threshold to avoid paying the SDIL. This assumption is informed by a cross-sectional study by Scarborough et al (2020).

Price pass-through

For the 35% of products brought into scope of SDIL that are not reformulated, it is assumed that 100% of price increases, as a result of SDIL, are passed onto consumers.

Product substitution:

For the 35% products that are not reformulated, it is assumed that as a result of price increases consumers will substitute to drinks with lower sugar content which are not affected by SDIL. HMRC have assumed an 11.1% reduction in demand for soft drinks and 11.3% reduction in demand for milk-based drinks brought into scope based on literature on the impact of the SDIL.

Sales

The most recent progress report shows that between 2015 and 2024, there was an increase in the total volume sold of drinks subject to SDIL. This growth was driven solely by products that had a sugar content below the levy threshold of 5g/100ml, with minimal growth in those above the levy threshold. This analysis focuses on products brought into scope by lowering the threshold, and it is therefore considered appropriate to assume no sales growth in soft drinks, milk-based drinks or milk substitute drinks.

Lactose allowance

The government will introduce a ‘lactose allowance’ to account for the naturally occurring sugar in the milk component of milk-based drinks. This means that lactose will not count as an ‘added sugar’ when calculating the liability for the threshold. This analysis includes a lactose allowance of 4g for milk-based products. Milk substitutes receive no lactose allowance. The real lactose allowance will vary based on the individual product.

Timeframe

It is assumed that there is a 3-year lead in time from the announcement to reformulation. This is based on insight from the existing levy. This analysis reflects impact on calories at year 3.

Limitations

The key limitations of this analysis are:

This is a modelled estimate, and the approach is sensitive to data and assumptions, particularly free sugar consumption and reformulation.

Lower free sugar consumption

The analysis uses mean free sugar consumption across each age group from the NDNS. If the 2.5th percentile for free sugar consumption, representing low consumers, is used instead, the calorie impact could reduce by around 75%.

Higher free sugar consumption

If the 97.5th percentile for free sugar consumption, representing high consumers, is used the calorie impact could increase by around 140%.

Reformulation

If the reformulation assumption (65%) is changed by 10 percentage points to 55% or 75%, the calorie impact could vary by around 5%

Reformulation

If it is assumed that products are reformulated to 0.1g below the new threshold, instead of using the sales weighted average sugar levels in the 5g band below, the calorie impact could reduce by around 15%.

Kantar sales data

The datasets used from Kantar have quality control measures built into their production processes. In addition, DHSC perform a rigorous cleaning process to ensure that:

• all products are being treated on a consistent basis (meaning in the original dataset some products are measured by their weight, others by servings)
• correct any inaccuracies in the nutritional data such as identifying implausible values and excluding them from the analysis and ensuring that nutrients are in the correct ratio (where appropriate)

NDNS consumption data

NDNS categories used in this analysis include goods outside of the scope of the SDIL. Kantar sales data has been used to approximate the proportion of sales which come from products in scope, however, this should be considered an estimate as it is not possible to fully match categories across data sets.

Notes

Changes from consultation stage estimates

The consultation included a health benefit assessment which included indicative analysis on the impact of the proposed changes to the Soft Drink Industry Levy:

This latest update:

• aligns to the preferred policy option
• includes the latest substitution assumptions from HMRC
• includes the latest GDP deflator
• updates to the latest nutrition data from the National Diet and Nutrition Survey
• updates to the latest sales data from Kantar

The latest National Diet and Nutrition Survey data (2019 to 2023) shows that estimates of free sugar consumption and the percentage contribution from soft drinks are lower than earlier estimates (2016 to 2019) across most age groups. In addition, the latest sales data shows that the sugar in products coming into scope of the lower threshold has reduced slightly. These are both positive outcomes for individuals’ diets and for the food environment.

This means the free sugar in scope of being removed from individuals’ diets is lower than previously estimated. Together with the estimates for milk-based and milk substitute drinks, the updates result in lower calorie reductions and health benefits than previously estimated.

Calorie model

Calorie Model Version 4.2 (the current model) was developed by DHSC analysts in early 2025 and is now in use. This version:

• minor structural amendments to align the model to coding best practice
• includes improved model documentation

For a full description of the model see Annex I – DHSC Calorie Model (Version 4.1) and the DHSC Calorie Model Technical Consultation Document. Quality assurance (QA) was carried out in line with government Aqua book principles.

Benefits have been adjusted from 2019 to 2025 prices using the GDP deflator, which is in accordance with the standard practice outlined in the HMT Green Book.

BMI Prevalence Model

The DHSC BMI Prevalence Model has been used to simulate the change in obesity prevalence from the change in calorie intake at population level. BMI Prevalence Model 1.4 (the current model) was developed by DHSC analysts in mid-2023 and is now in use.

The model’s purpose is to simulate the long-term impacts of policies that affect calorie intake at a population level. By estimating changes in calorie intake, alongside other key assumptions, the model estimates the change in obesity prevalence rate.

The model is based on equations by Henry (2005) and is calibrated for the population in England using 2019 height and weight data from Health Survey for England (HSE) and population data from Office for National Statistics (ONS).

Annex A: Respondents to the consultation

Action Sugar

Arla Foods

Asda Stores Limited

Association of Convenience Stores

Association of Dental Hospitals

Betsi Cadwaladr University Health Board

BiteBack

Breakthrough T1D

British Dental Association

British Diabetic Association

British Fruit Juice Association

British Heart Foundation

British Medical Journal

British Retail Consortium

British Society of Paediatric Dentistry

British Soft Drinks Association

Cancer Research UK

Carlsberg-Britvic

CIOT

Coca Cola

Council for Responsible Nutrition

Cumberland Council and Food Cumberland Partnership

Dairy UK

Danone UK and Ireland

Diabetes UK

European Specialist Sports Nutrition Alliance (ESSNA)

First Steps Nutrition Trust

Food Active

Food Foundation

Food and Drink Federation

Global Brands Ltd

Hampshire County Council

ICAEW

Institute of Food Science and Technology

Irish Beverage Council

Jamie Oliver

Kidney Research UK

King’s College London

London School of Economics

Medical Research Council

Muller UK and Ireland

Nestle

Newcastle City Council

OATLY

Obesity Health Alliance

Oral Health Foundation

PepsiCo International Limited

Plant Based Food Alliance

Provision Trade Association

Pupils 2 Parliament

Recipe for Change

Scottish Grocers’ Federation

Sunderland Health and Well Being Board

SUNTORY Beverage and Food GB&I

Sustain: The Alliance for Better Food and Farming

Tenzing

Total Diet and Meal Replacements Europe

The Vegan Society

The Vending and Automated Retail Association

Wine and Spirit Trade Association

World Cancer Research Fund