The Soft Drinks Industry Levy (SDIL) is a tax on pre-packaged
soft drinks containing added sugar, implemented in April 2018.
The original SDIL had sizeable effects on sugar intake, cutting
average per-person calories by around 18 kcal per day.
At the 2025 Autumn Budget, the government announced plans to
expand the scope of the tax, extending the levy to soft drinks
with 4.5–5 g of sugar per 100 ml and bringing pre-packaged
milk-based drinks with added sugar into the tax for the first
time.
New IFS research shows that these reforms will bring an
additional 12% of soft drink litres sold into scope of the
levy. Despite this, and in contrast to the original
SDIL, the effects of these changes on sugar consumption
will be extremely small. We estimate that the reforms
will reduce average per-person calorie intake by 0.3 kcal per day
(less than one five-thousandth of the recommended daily calorie
intake for adults).
This is around 60 times smaller than the effect of the original
SDIL, reflecting lower baseline sugar consumption from
soft drinks compared with 2018, a smaller share of the
market being brought into scope, and smaller expected
reductions in sugar per product. Small effects on sugar
intake also mean that the costs for families will be small,
costing the average household less than 2p per week.
Small effects do not in themselves make these reforms misguided.
One advantage of the reforms is that they are expected to have
larger effects for households who purchase the most sugar, who
are most at risk of excess sugar consumption. But set against the
government's claims that the changes will ‘protect children and
improve health', these effects won't move the dial on
sugar consumption or childhood obesity.
The reforms also do nothing to correct the underlying
peculiarities that mean the sugar content of the
heaviest-sugar drinks are taxed more lightly than lower-sugar
alternatives. Taxing high-sugar products more heavily
would reduce sugar consumption among the households that purchase
the highest amounts of sugar in a more targeted way than the
current system.
Other key findings from the new research, published today by the
Institute for Fiscal Studies and funded by the Economic and
Social Research Council, include
- Producers and manufacturers were highly responsive to the
original soft drinks levy, with many reformulating their drinks
to sit just below the existing taxable threshold. Prior
to the introduction of the SDIL, 2% of soft drinks sold had 4.5–5
g of sugar per 100 ml; this has now risen to 8% of the
market. The recent changes will bring these drinks into
scope of the tax.
- The reforms are somewhat targeted at households who purchase
the greatest proportion of their calories from sugar: 14%
of soft drinks bought by this high-sugar-consumption group will
be affected, compared to 10% for the households with the
lowest sugar intake. But even for this high-sugar-consumption
group, the effects of the reforms will still be very
small (cutting out 0.4 kcal of sugar per day).
-
Increasing taxes on the highest-sugar drinks would be a
better way to target the heaviest consumers of sugar.
A 7p increase in the higher rate of the SDIL would have the
same average effects on sugar intake as the actual reforms, but
would reduce sugar intake by 0.6 kcal per day for the
households that consume the most sugar.
Martin Brogaard, Research Economist and coauthor of the
report, said:
‘The impact of the recent reforms to the soft drinks levy will be
limited. Despite bringing an additional 12% of soft drink litres
into scope, the reforms are expected to reduce sugar intake by
just 0.3 calories per person per day – compared with a reduction
of 18 calories per day following the initial introduction of the
SDIL. These reforms are best thought of as small tweaks to the
existing system rather than a significant step in tackling
obesity.'
Gautam Vyas, Research Economist and coauthor of the
report, said:
‘A well-designed tax on soft drinks can be an effective way to
improve diets – but the Soft Drinks Industry Levy gets
the targeting backwards. Among in-scope products, sugar is taxed
most lightly in the drinks that contain the most of it.
The recent changes do nothing to fix this design flaw. A
levy that taxed the most sugary drinks
more heavily would be better aligned with the
harms it is intended to address – and would do more to
reduce sugar intake among the households who consume the most of
it.'
ENDS
Notes to Editor
Assessing recent changes to the Soft Drinks Industry
Levy is an IFS report by Martin Brogaard and Gautam
Vyas.
