Smokers are facing a huge hike in the price of cigarettes following a tobacco tax increase in the Spring Budget 2023.
Jeremy Hunt announced taxes will rise in line with inflation - specifically the Retail Price Index (RPI) - on top of the extra 2% levy on pre-rolled tobacco products. It came after he also announced a tax hike for most alcohol products.
The rest of the Chancellor of the Exchequer’s Budget speech focused on getting people back into work as part of a bid to get the UK economy growing again. While the UK looks set to avoid a ‘technical’ recession, public body the Office for Budget Responsibility (OBR) has forecast an economic contraction over the course of 2023 and weaker growth than previously expected from 2025 until at least 2028.
Key policies Hunt announced in his Budget included an extension of the 30 hours free childcare scheme to parents of younger children, as well as pension incentives to get early retirees back on the payroll. There was limited cost of living help, with the most significant announcement being a delay to the 20% hike in the energy price guarantee.
But what did the Chancellor say about tobacco duty - and how much more expensive will smoking become?
What did Jeremy Hunt say about tobacco duty?
Changes to tobacco duty were announced in Wednesday (15 March) Spring Budget. In one very quickly delivered sentence, Hunt pushed taxes up significantly for the estimated 13.3% of the UK population (some 6.6 million people) who still buy cigarettes.
While the Chancellor only devoted five words to the tax hike, a supporting Treasury document suggested the government hopes people will reduce their tobacco consumption in light of the tax hike. It said: “Assuming duty increases are passed on to consumers, this measure will impact on individuals who smoke by increasing the price of tobacco products. Heavy smokers will face the highest burden from this measure.
“In response to higher prices, some individuals could choose to consume less, some could down-trade from more expensive to cheaper tobacco products and others could engage in cross-border shopping or purchase from the illicit tobacco market. HMRC will monitor and respond to any potential shift in illicit consumption as part of its strategy to combat tobacco fraud.”
The changes mean an extra £25 million will flow into the Treasury every year until 2027
How much more expensive will smoking become?
From the 6pm on the day of the Budget, Hunt said levies will rise by RPI - 13.4% as of January 2023 - plus 2% for pre-rolled tobacco products. It means a pack of cigarettes will increase by 15.4% - an increase of almost £2 for a typical 20-pack of cigarettes to £14.84.
This increase is in line with a tax escalator - i.e. a legislated increase in taxes with each Budget speech - that was introduced in the 2021 Autumn Budget delivered by Rishi Sunak. But for people who prefer hand-rolled tobacco, there will be an additional 6% increase on top of the RPI rate for hand-rolling tobacco, which means prices will rocket by almost a fifth on loose tobacco and rolling products after Hunt’s Spring Statement.