Sugar levy changes: what they cost your range

1. The rules today

Two bands, charged per litre

The Soft Drinks Industry Levy is paid to HMRC by the producers and importers of soft drinks with added sugar. It is charged per litre, at one of two rates depending on the total sugar per 100ml. Drinks under 5g per 100ml pay nothing today.

The rates didn't change from April 2018 until April 2025, so inflation steadily cut their real value. The government is now restoring it in yearly steps: each April until 2029, both rates rise with inflation plus a fixed amount.

Producers of less than one million litres of liable drinks a year don't have to register or pay. For squash and other concentrates, the sugar and the volume are both worked out on the drink as diluted.

2. What changes in 2028

Two changes from 1 January 2028

The threshold drops from 5g to 4.5g per 100ml

Drinks with 4.5g to under 5g of sugar per 100ml will pay the lower rate for the first time. Many drinks were reformulated to sit just under 5g when the levy started: according to the Institute for Fiscal Studies, the share of soft drink litres in the 4.5g to 5g band rose from 2% before the levy to 10% after it, and about 8% of litres sold in 2023 were in that band.

Milk-based and milk-alternative drinks with added sugar come into scope

Drinks with at least 75ml of milk per 100ml have been exempt until now. From 2028, pre-packaged milk-based and milk-alternative drinks with added sugar are included: milkshakes, flavoured milks, sweetened yoghurt drinks, chocolate milk drinks and ready-to-drink coffees. Only the sugar above a lactose allowance counts, and the allowance varies by product. With an allowance of 4g per 100ml, for example, a milk drink with 8.4g of total sugar per 100ml would stay out of scope, and one with 8.6g would come in.

Plain, unsweetened milk and milk-alternative drinks stay exempt, and so do drinks made to order in cafes and restaurants.

3. The levy per pack

What it adds to each pack

At the rates from 1 April 2026. If the levy is passed on to shoppers, VAT is charged on top of it, so the shelf price rises by a fifth more than the levy itself.

4. Your range's bill

Work out the bill for your range

Enter how many litres a year you sell in each band. For cans and bottles, litres are units times pack size: a million 330ml cans is 330,000 litres. Everything runs in your browser.

5. Pass it on, absorb it or reformulate?

The answer depends on your price elasticity

The bill is the easy part. The decision is what to do about it, and that depends on how many sales you lose when the price goes up. Here is a worked example, with made-up but realistic numbers.

From 2028 the levy adds 6.9p a can, or £412,000 a year at today's rates. The two simplest choices compare like this:

In this example, passing the levy on costs less than absorbing it unless the can's elasticity is beyond about -3.5. But the gap between -£133k and -£363k is the difference between a manageable year and a painful one, and it depends entirely on a number most brands have never measured. When the levy started in 2018, the evidence suggests it was passed on to shoppers in full, and the IFS assumes the same for 2028.

Reformulating

Bringing the lemonade under 4.5g avoids the levy altogether. It pays if its yearly cost comes to less than passing the levy on would: here, £133k to £363k a year, depending on the elasticity. That yearly cost is the one-off work (recipe development, consumer testing, new artwork, old packaging written off) spread over the years you expect to sell the new recipe, plus any change in ingredient cost and any sales lost to a new taste.

What the example leaves out

• Where lost sales go. Shoppers who leave the lemonade may buy your own zero-sugar version, which softens the loss, or a competitor's, which doesn't.
• What competitors do. If rivals absorb the levy while you pass it on, your price rises against theirs and you lose more volume than the elasticity alone suggests.
• Retailers. You set your price to the retailer; the retailer sets the shelf price, and may not move it by exactly the levy.

Measuring these across a whole range, product by product, is what our service does. For a first look at one product's elasticity, try the free calculator.

6. Before January 2028

A checklist

• List every product with its sugar per 100ml and litres a yearFlag those between 4.5g and 5g, and every milk-based drink with added sugar.
• Work out the billUse the calculator above at today's rates, then add the April 2027 rise once it is announced.
• Measure each affected product's price elasticityAnd measure where its sales go when its price rises: to your other products, or out of your range.
• Compare the choices in profit, product by productPass on in full, pass on in part, absorb, or reformulate. The best answer can differ between two products in the same range.
• Start reformulation earlyRecipe development, consumer testing and new packaging take months, and the change has to be on shelf by 1 January 2028.
• Talk to retailers in good timeCost price changes need notice and a clear case, and January is a busy month for price changes.

7. Questions

Questions people ask

Sources. Rates and scope: GOV.UK, Soft Drinks Industry Levy guidance (rates from 1 April 2026) and the announcement of 25 November 2025. Market shares, the yearly rate rises and pass-through: Institute for Fiscal Studies, Assessing recent changes to the Soft Drinks Industry Levy (March 2026). Check GOV.UK for the latest rates before making decisions; this page is not tax advice.