Jeremy Hunt is expected to announce a new tax on vaping products at next week’s Spring Budget.
The Chancellor is considering the fresh levy, according to the Times which first reported the story, being placed on the liquid in vapes based on the amount of nicotine they contain.
It comes after the government confirmed plans last month to ban disposable vapes and bring in a new law in a bid to stop children aged 15 and under from ever legally buying tobacco.
Ahead of next week’s Budget, Hunt is reportedly also considering a one percentage point cut to employee national insurance, costing around £4.5bn a year.
Vapes, which are often marketed as a healthier alternative to cigarettes and a way to get adults to stop smoking, are subject to VAT but not, like tobacco, under a separate levy.
The government has voiced concerns that the cost and accessibility of vapes make them attractive to young people and non-smokers, risking future health issues.
Ministers may choose to increase tobacco duty alongside bringing in a vaping levy on imports and manufacturers to ensure e-cigarettes remain a cheaper alternative to smoking.
The Times reported the two measures are expected to generate more than £500m a year between them by 2028-29.
Taxing vapes is based on similar schemes across Europe, including in Germany and Italy where levies range from €1.30 to €1.60 on each 10ml of vape liquid, while the European Union (EU) is planning a bloc-wide vaping levy, of reportedly up to 40 per cent.
Christopher Snowdon, from free market think tank the Institute of Economic Affairs (IEA), said: “We know what happens when e-cigarettes are taxed. The evidence from other countries shows that it leads to more cigarette sales and more smoking.
“When you have two substitute products, discouraging the use of one amounts to encouraging the use of the other. Anti-vaping policies are essentially pro-smoking policies.”
The Treasury has been contacted for comment.
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