The UK’s Soft Drinks Industry Levy, often called the “sugar tax,” is getting a modest expansion.
Announced in the 2025 Autumn Budget and set to take effect in January 2028, the changes will lower the sugar threshold for taxation from 5g to 4.5g per 100ml and extend the levy to pre-packaged milk-based and milk-alternative drinks with added sugar, such as flavoured milks, milkshakes, and certain ready-to-drink coffees.
The government has framed the move as a step to protect children’s health and tackle obesity by encouraging manufacturers to reformulate products or face the tax. Officials have suggested potential benefits, including broader reductions in sugar intake across popular family drinks.
However, a new analysis from the Institute for Fiscal Studies (IFS), published March 25, 2026, paints a far more modest picture. The reforms are expected to trim average daily calorie intake from soft drinks by just 0.3 kcal per person under central assumptions – equivalent to less than a single calorie a day and roughly 60 times smaller than the impact of the original 2018 levy.
What the original sugar tax achieved
Introduced in 2018, the SDIL imposes a levy of 19.4p per litre on drinks containing 5-8g of sugar per 100ml and 25.9p per litre on those with more than 8g. Drinks below the threshold are exempt. The policy was designed to curb childhood obesity by prompting reformulation and shifting consumer choices toward lower-sugar options.
It worked to a degree. The original levy led to significant reformulation, with the sugar content in affected soft drinks falling sharply.
Per-person calorie intake from soft drinks dropped by an estimated 18 kcal per day, with about 80% of that reduction coming from manufacturers cutting sugar rather than consumers simply switching drinks. Overall, sugar from soft drinks fell from around 10.5g to 7.5g per person per day.
Today, diet and no-added-sugar drinks dominate the market, accounting for about 74% of sales.
The 2028 upgrades
The upcoming changes will bring an additional 12% of soft drink litres into the scope of the tax – 8% from the new 4.5-5g band and around 5% from milk-based drinks. That raises the taxed share of the market from 13% to 25%.
Using detailed household purchase data from 2014–2024 and economic modelling, IFS researchers Martin Brogaard and Gautam Vyas simulated the likely outcomes. They tested different scenarios for how much manufacturers reformulate (0%, 65%, or 100% of affected products) and how much consumers switch between drinks.
Under their central case – 65% reformulation and moderate substitution – the reforms deliver that tiny 0.3 kcal/day average reduction in soft drink calories (about 0.09g of sugar). Even in more optimistic scenarios, the effect tops out around 0.6 kcal/day.
For context, that’s a negligible fraction of an adult’s typical 2,000–2,500 daily calorie intake and far below the scale needed to move the needle on obesity meaningfully.
The impact is slightly larger for households with the highest free-sugar intake (0.42 kcal/day reduction) but still minimal. Effects are broadly similar for households with and without children at home, though out-of-home purchases by children show somewhat higher exposure to affected products.
Price effects
The IFS expects the changes to raise average soft drink prices by around 1.1%, adding less than 2p per week to the typical household’s bill. Manufacturers will have until January 2028 to reformulate and avoid or minimise the levy.
Critics and analysts note that the original tax’s success relied heavily on widespread reformulation when a large chunk of the market was initially in scope. This time, the affected share is much smaller, and baseline sugar levels in soft drinks are already lower, leaving less room for dramatic cuts.
The banded, volumetric structure of the tax has also drawn commentary for lacking a strong economic rationale – it doesn’t directly scale with the marginal health harm of each gram of sugar.
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