Soft Drink Industry Levy changes
Published 13 July 2026
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This publication is available at https://www.gov.uk/government/publications/changes-to-the-soft-drinks-industry-levy/soft-drink-industry-levy-changes
Who is likely to be affected
Businesses who package or import packaged soft drinks, including those which are carbonated, milk-based and milk-substitutes, and contain at least 4.5 grams of added sugar per 100 millilitres. Open cup beverages, such as those bought in cafes, will remain unaffected.
General description of the measure
As announced at Budget 2025, the following changes to the Soft Drinks Industry Levy (SDIL) will have effect from 1 January 2028:
- the threshold at which a soft drink with added sugar becomes liable for the SDIL will be lowered from 5g to 4.5g per 100ml
- the current exemption for milk-based drinks with added sugar will be removed and the tax thresholds applied to the total sugars in the drink minus those sugars present from lactose in milk or milk products
- the current exemption for milk substitute drinks with added sugar will be removed and the tax thresholds applied to the total sugar content in the drink
Policy objective
The SDIL applies to the production and importation of liable soft drinks containing added sugars. It supports the government’s efforts to tackle obesity by incentivising the reduction of added sugar in soft drinks.
Background to the measure
The SDIL came into effect in April 2018.
At Autumn Budget 2024 the government announced a review of the levy to identify opportunities to improve its effectiveness at reducing sugar in soft drinks. A consultation was launched on 28 April 2025 and concluded on 21 July 2025. Changes to the SDIL were announced at Budget 2025.
Detailed proposal
Operative date
The measure will have effect from 1 January 2028.
Current law
SDIL is enacted in Part 2 of the Finance Act 2017 and the Soft Drinks Industry Regulations 2018.
Proposed revisions
Legislation will be introduced in Finance Bill 2026-27 to amend Finance Act 2017, Part 2. Consequential amendments will be made to the SDIL 2018 Regulations.
Summary of impacts
Exchequer impact (£m)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| +0 | +0 | +10 | +40 | +40 | +40 |
These figures are set out in Table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025.
Economic impact
This measure is not expected to have any significant macroeconomic impacts, with the direct impact of the proposed changes on CPI inflation expected to be negligible.
Impacts on individuals, households and families
This measure will indirectly impact all individuals that consume soft drinks, milk-based and milk substitute drinks that may become subject to the SDIL.
The government estimates that only an additional 4% of soft drink sales will pay SDIL as a result of these changes after accounting for expected reformulation.
This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change doesn’t directly impact them.
The measure is expected to have no impact on family formation, stability, or breakdown.
Equalities impacts
This measure may apply to individuals regardless of their protected characteristics. HMRC does not currently hold data on the protected characteristics of individuals impacted by this measure and so cannot assess if there are any disproportionate impacts to protected groups.
Administrative impact on business including 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, the government considers this impact to be proportionate, on the basis that this impact applies only to approximately 11% of soft drinks sales, many manufacturers have previously reformulated their products in response to SDIL when it was first introduced and will have time to do so again as these changes will not come into scope until January 2028.
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. The administrative impact on businesses is expected 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, it is not anticipated that compliance will present significant challenges for 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.
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.
Operational impact (£m) (HMRC or other)
HMRC will need to make changes to HMRC IT systems to support implementation of this measure. These changes are currently assessed as being less than £0.1m.
Other impacts
Other impacts have been considered, and none has been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax receipts and by the Department of Health and Social Care.
Further advice
If you have any questions about this change, please contact the General Enquiries Helpline on Telephone: 0300 200 3700