Hand-rolling tobacco duty rate
Published 16 March 2016
© Crown copyright 2016
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/hand-rolling-tobacco-duty-rate/hand-rolling-tobacco-duty-rate
Who is likely to be affected
Manufacturers, importers, distributors, retailers and consumers of hand-rolling tobacco products.
General description of the measure
This measure increases the hand-rolling tobacco (HRT) duty rate by 5% above retail price index (RPI) inflation this year. This is an additional 3% rise above the tobacco duty escalator which, as announced at Budget 2014, will continue until the end of the Parliament.
Policy objective
The government is committed to maintaining high tobacco duty rates as this is an established tool to reduce smoking prevalence and to ensure that tobacco duties continue to contribute to government revenues. This increase goes further than the duty escalator and narrows the gap between the duty on HRT and that on cigarettes. This reduces the incentives for consumers to substitute to relatively lower priced products.
Background to the measure
Budget 2014 announced that the specific duty on all tobacco products will continue to increase by 2% above RPI inflation each year until the end of this Parliament.
Detailed proposal
Operative date
The new Tobacco Duty rates will have effect from 6pm on 16 March 2016.
Current law
The duty rates on tobacco products are set out in the table in Schedule 1 to the Tobacco Products Duty Act 1979.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to increase the duty rate on all HRT by 5% above inflation. The legislation will amend Schedule 1 to the Tobacco Products Duty Act 1979.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| +10 | +10 | +10 | +10 | +10 |
These figures are set out in Table 2.1 of Budget 2016 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2016.
Economic impact
If passed on to consumers, this measure is expected to have a very small positive impact on inflation.
The costing includes a behavioural effect to account for the reduction in consumption resulting from higher prices.
Impact on individuals, households and families
Assuming the duty increase is passed on to consumers, this measure will impact on individuals who smoke HRT by increasing its price. Heavy HRT smokers will face the highest burden from this measure.
This measure is not expected to have an impact on family formation, stability or breakdown.
Equalities impacts
Due to differences in HRT consumption, any change to the HRT duty rate will have a small equalities impact that reflects HRT consumption trends across the adult population.
At the same time, evidence suggests that there are significant public health benefits to increasing duties on (and therefore the price of) cigarettes and other tobacco.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses and civil society organisations.
Tobacco manufacturers and importers will face an increase in the HRT duty rate which they are likely to pass onto consumers.
The change to the HRT duty rate will impose a negligible one-off administrative cost to businesses.
Small and micro business assessment: an increase in HRT duty rate will affect all sizes of businesses in the tobacco sector, including small and micro business.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
HMRC will incur a negligible one-off cost for changing the HRT duty rate.
Other impacts
Health impact assessment: evidence suggests that there are significant public health benefits to increasing duty rates (and therefore the price of) cigarettes and other tobacco. Any reduction in smoking prevalence will have a positive impact on health and reduce the cost to the NHS of smoking-related illness. There may also be reductions in other costs that arise from the health impacts of tobacco use.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax receipts.
Further advice
If you have any questions about this change, please contact the Excise and Customs Helpline on Telephone: 0300 200 3700.