Budget 2025: How the Expanded Sugar Tax Could Impact Prices, Spending, and Inflation
The 2025 UK Budget widens the sugar tax to more drinks, including milkshakes and sweetened plant-based beverages. Here’s how this change may affect prices, inflation, and everyday budgeting — and why it matters for households and businesses.
Budget 2025: How the Expanded Sugar Tax Could Impact Prices, Spending, and Inflation
In the 2025 Budget, the UK Government announced major changes to the Soft Drinks Industry Levy — commonly known as the sugar tax — with the goal of reducing sugar consumption and improving public health. While this policy is centred on health outcomes, it may also affect inflation, household spending, and the cost of everyday drinks.
🔗 Official Source:
https://www.gov.uk/government/news/soft-drink-levy-extended-to-protect-children-and-improve-health
What Is Changing?
Starting 1 January 2028, the scope of the sugar tax will expand to include more products:
| Change | Previous Rule | New Rule Starting 2028 |
|---|---|---|
| Sugar Threshold | 5g of sugar per 100ml | 4.5g of sugar per 100ml |
| Milk-Based Drinks | Exempt | Taxed if sugar exceeds threshold |
| Sweetened Plant-Based Drinks | Often exempt | Now included |
📄 Consultation Outcome (Government):
https://www.gov.uk/government/consultations/strengthening-the-soft-drinks-industry-levy/outcome/strengthening-the-soft-drinks-industry-levy-summary-of-responses
This means drinks such as pre-packaged milkshakes, sweetened lattes, flavoured milks, and sugar-added oat or soya drinks will now be taxed.
📰 News Coverage (Reuters):
https://www.reuters.com/business/healthcare-pharmaceuticals/britain-end-exemption-milk-based-drinks-sugar-tax-2025-11-25/
Why Is the Levy Being Extended?
The Government says these changes are meant to reduce excessive sugar consumption particularly among younger groups, and to ease long-term pressure on the NHS.
📢 Public Health Rationale:
https://www.gov.uk/government/news/soft-drink-levy-extended-to-protect-children-and-improve-health
The original levy (introduced in 2018) successfully led many manufacturers to reformulate drinks to reduce sugar. The government hopes for similar results from this expansion.
How This Could Affect Prices and Budgeting
While the levy applies to manufacturers, price changes may reach consumers if companies pass on the extra cost.
| Area | Possible Impact |
|---|---|
| Supermarket Prices | Some drinks could become more expensive |
| Family Budgets | Higher costs for flavoured milks, bottled coffees, milkshakes |
| Small Businesses | Venues may reconsider beverage options and pricing |
| Inflation | May contribute mildly to food & drink inflation |
📰 Industry Impact (Financial Times):
https://www.ft.com/content/0bd20642-fa27-4826-99bb-e186b6a3360b
📊 Possible Recipe Changes (The Times):
https://www.thetimes.com/uk/politics/article/wes-streeting-sugar-tax-nzq55bmvx
Business and Hospitality Considerations
Businesses such as cafés, venues, schools, events and hospitality providers may need to:
- Review supplier pricing for pre-packaged drinks
- Consider lower-sugar or reformulated alternatives
- Adjust pricing structures before 2028
- Monitor stock and menu profitability
👉 Drinks prepared on-site (e.g., barista-made coffees) remain exempt from this tax.
📰 Clarification Coverage (The Guardian):
https://www.theguardian.com/business/2025/nov/25/uk-sugar-tax-milkshakes-pre-packed-lattes
Does the Sugar Tax Affect UK Inflation?
Economists say this tax is unlikely to significantly move overall inflation, but it could affect specific subcategories such as Food and Non-Alcoholic Beverages.
💡 Categories most likely to see price effects:
- Bottled milkshakes
- Sweetened ready-to-drink iced coffees
- Chocolate milks and flavoured dairy drinks
- Sweetened oat/soy drinks
What Can Consumers Do?
Here are practical ways to prepare:
| Action | Benefit |
|---|---|
| Compare labels | Find lower-sugar or reformulated options |
| Look for promotions | Supermarkets may offer budget-friendly alternatives |
| Explore homemade options | Cheaper and often healthier |
| Track budgeting impact | Useful for Spending & Inflation planning |
Final Thoughts
The sugar tax expansion is a public-health policy, but it will also influence how we spend, budget, and choose drinks over the next few years. Reformulated, lower-sugar drinks may become more common, while some beverages could rise in cost.
Understanding these changes helps consumers, families, and businesses prepare before the 2028 implementation.
Sources and Further Reading:
- UK Government Policy Update – https://www.gov.uk/government/news/soft-drink-levy-extended-to-protect-children-and-improve-health
- Consultation Summary – https://www.gov.uk/government/consultations/strengthening-the-soft-drinks-industry-levy
- Reuters Coverage – https://www.reuters.com/business/healthcare-pharmaceuticals/britain-end-exemption-milk-based-drinks-sugar-tax-2025-11-25
- FT Report – https://www.ft.com/content/0bd20642-fa27-4826-99bb-e186b6a3360b
- The Times – https://www.thetimes.com/uk/politics/article/wes-streeting-sugar-tax-nzq55bmvx
- The Guardian – https://www.theguardian.com/business/2025/nov/25/uk-sugar-tax-milkshakes-pre-packed-lattes
Disclaimer: This article is for general informational purposes only. It is not financial, tax, health, legal, or professional advice. Always check official sources or seek professional guidance for specific decisions.
