Tobacco duties are levied on purchases of cigarettes, hand-rolled tobacco, cigars and other forms of tobacco. In our latest forecast, we expect tobacco duties to raise £9.4 billion in 2017-18. That would represent 1.3 per cent of all receipts and is equivalent to 0.5 per cent of national income. Duty on cigarettes accounts for nearly 90 per cent of all tobacco duty receipts.
There are different rates for each type of product:
- the rate on cigarettes is 16.5 per cent of the retail price plus £4.34 on a packet of 20;
- the rate on cigars is £2.70 for a 10g cigar;
- the rate on hand-rolling tobacco is £5.53 for a 25g packet; and
- the rate on other smoking and chewing tobacco is £2.98 for a 25g packet.
VAT is applied after tobacco duty, so, for example, the price of a packet of 20 cigarettes currently reflects the pre-tax price plus 16.5 per cent ad valorem plus £4.34 of duty tax plus 20 per cent VAT on both the pre-tax price and the duty.