The reform of the soft drinks industry levy (SDIL) enters its final phase and redraws the balance of the British beverage industry. From January 1, 2028Packaged milkshakes, flavored milks, sugary plant-based drinks, and ready-to-drink coffees will be subject to the sugar tax, which until now has been limited to traditional soft drinks. The decision comes after a public consultation that gathered 174 answers, between citizens, academics, health associations and producers.
The most significant change concerns the lowering of the threshold for applying the levy: from 5 g to 4,5 g of sugar per 100 ml, an intermediate measure compared to the 4g hypothesis initially considered. The government believes that this level "balances public health and industrial stability," while expanding the number of taxed products. The inclusion of packaged dairy drinks eliminates an exemption active since 2016, while maintaining a “lactose allowance” which considers only the sugars naturally present in milk.
Government document stresses urgency of intervention: obesity costs the English health system approximately £11,4 billion a year, while the impact on productivity reaches 8,9 billion. According to official estimates, the extension of the SDIL will lead to a measurable reduction in caloric intake (up to 0,4 kcal per day in young people) and will produce economic benefits equal to £973 million over 25 years, between health savings and greater economic output.
The measure should generate £40-45 million per year of additional revenue, with a negligible impact on inflation (less than 0,02 percentage points). Companies will have more than two years to reformulate: 18 pence per litre above 4,5g/100ml and 24 pence above 8g will remain taxed. Fresh products prepared in bars, natural cow's milk, plant-based drinks without added sugars and toddler milks sold in powder form.
On the international trade front, the government acknowledges potential challenges in the movement of beverages between Northern Ireland and the Republic of Ireland, where different tax regimes apply. However, the government has assured that no further changes will be made to the SDIL during this parliamentary term, to ensure regulatory certainty for the industry.
The beverage sector is thus preparing for a new era of reformulation, innovation, and repositioning. And while some in the industry are expressing concerns about production costs and complexity, health associations are applauding the move. For the British government, the direction is clear: less sugar on shelves and a more coherent regulatory framework to protect children, families, and the sustainability of the healthcare system.
