The UK law changes coming in 2025 making it more expensive to drink and smoke

Labour’s first budget in over a decade saw a huge raft of changes announced for 2025. Among these were increases to the price of alcohol and tobacco.

Alcohol duty rates will increase from February, while tobacco duty will go up around the same time. Here’s a timeline of when you can expect the numerous changes announced today to take effect.

January to December 2025

• Alcohol duty rates on non-fraught products will increase in line with RPI from February 2025
• Renewal of tobacco duty escalator plus increase duty by 10 per cent on hand-rolling tobacco
• VAT on private school to be implemented alongside a removal of business rates relief from January 2025
• Fuel Duty tax to be frozen for the next year
• National Minimum wage to increase in April 2025 to £12.21 per hour
• Employer National Insurance Contribution to rise to 15 per cent from April 2025 alongside a threshold decrease at which it becomes payable to fall from £9,100 to £5,000
• Abolishment of non-dom regime from April 2025 to be replaced with a new residence scheme
• State Pension triple lock increase of 4.1 per cent in 2025
• Pension Credit increase of 4.1 per cent
• Carried interest rate to increase to 32 per cent (this is the share of profits of an investment paid to the investment manager)
• Employment Allowance to increase from £5,000 to £10,100
• Business rates for retail, hospitality, and leisure at 40 per cent to continue into 2026 with a cap of £110,000 per business
• An increase in the differential between fully electric and other vehicles in the first year rates of vehicle excise duty from April 2025
• An increase to Ministry of Defence budget of £2.9 billion in 2025
• Additional funding for local government in 2025 including £1.3bn of additional grant for “essential services”

Renewal of tobacco duty escalator plus increase duty by 10 per cent on hand-rolling tobacco is planned

January to December 2026

• Flat rate duty introduction on all vaping liquid from October 2026
• Planned reform on agricultural property relief and business property relief – from April 2026, the first £1 million of combined business and agricultural assets to attract no inheritance tax