Chancellor Rachel Reeves is expected to announce the inclusion of milk drinks within the Soft Drinks Industry Levy (SDIL) in the Autumn Budget, as well as lowering the minimum sugar content threshold at which the tax applies, according to widespread reports.
The government announced a review of the SDIL at last year’s Autumn Budget and ran a consultation on the proposed changes earlier this year, with a view to confirming the final policy at the Autumn Budget 2025.
Drinks with 5 to 7.9g sugar per 100ml are currently taxed 19.4p per litre, but the proposals would see the lower threshold changed to 4g. This would impact products, such as Irn Bru, 7Up, Pepsi and Fanta, which all contain between 4.5 and 4.7g of sugar per 100ml.
In addition, the government is looking to include milk drinks and milk substitutes with added sugar within the SDIL remit. This would mean that Ready To Drink coffee products, such as certain Starbucks and Jimmy’s lines, and flavoured milk drinks, such as Yazoo and Shaken Udder, would be within the scope of the sugar tax.
Currently, milk-based drinks are exempt from the sugar tax, provided they contain at least 75ml of milk per 100ml. The exemption was initially provided to ensure that the SDIL did not disincentivise sufficient consumption of calcium, especially among young people. For parity of treatment between animal milk and alternatives to it, milk substitutes were also exempt from the SDIL provided they contain at least 120mg of calcium per 100ml.
However, due to the high sugar content of some milk-based drinks, the Government has reconsidered the case for removing the exemption. Milk substitutes with added sugar, including the flavoured varieties that could be consumed as alternatives to flavoured milk-based drinks, would also be included within the scope under the proposals.
To ensure a consistent approach that recognises the health benefits of plain milk, and accounts for naturally occurring lactose in milk, the government proposed introducing a lactose allowance into the SDIL, alongside removing the exemption for milk-based drinks, during its April consultation. The level of lactose allowance would vary depending on the percentage milk content of a milk-based drink. This is for fairness, so that a drink that is 90% milk receives a greater allowance for naturally occurring lactose than a drink that is 75% milk.
Will Jones, Managing Director at FrieslandCampina, said:
“We would be extremely disappointed if the Government were to remove the exemptions for milk-based drinks without the provision for a ‘lactose allowance’ – to account for the naturally occurring sugars present in milk, as proposed by the Government in its latest consultation in April of this year.
“What we’ve seen in the media so far is unclear whether those potential changes would only apply to ‘added sugar’, or to lactose, which contains naturally occurring sugars.
“If the Government has listened to the industry, it will implement a lactose allowance for milk-based and milk-substitute drinks. This is a much more sensible approach that does not penalise those sugars disproportionately and would enable the dairy drinks sector to meet evolving consumer demands more effectively.”
