Finance
Britain to end exemption for milk-based drinks from sugar tax
Published by Global Banking and Finance Review
Posted on November 25, 2025
2 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 25, 2025
2 min readLast updated: January 20, 2026
UK will end sugar tax exemption for milk-based drinks by 2028 to combat obesity. The change is expected to raise £45 million annually.
LONDON (Reuters) -Britain will scrap a sugar-tax exemption for pre-packaged milk-based drinks, including bottled milkshakes and milky coffees, the health department said on Tuesday, as part of efforts to curb an "obesity epidemic".
The sugar tax, also known as the Soft Drinks Industry Levy (SDIL), targets pre-packaged drinks such as those sold in cans and cartons in supermarkets.
It was introduced in 2016 by the then-Conservative government to help drive down obesity, particularly among children, offering a tax incentive for drinks producers to reduce sugar in their recipes.
The health department said the exemption will end in January 2028, giving the soft drinks industry two years for reformulation.
It said "open-cup" milkshakes prepared in cafes, bars and restaurants will remain out of the scope of the tax, as will plain cow’s milk, and other milk drinks without added sugar.
However, the government will reduce the current lower threshold at which SDIL applies from 5g of total sugar per 100ml to 4.5g of total sugar per 100ml.
It will also remove the exemption for milk substitute (plant-based) drinks with added sugar.
"The government remains committed to addressing the obesity epidemic and considers prioritising a system of prevention to be instrumental in tackling the health and economic impacts of obesity," the health department said.
It said the changes are expected to raise up to 45 million pounds ($59 million) a year in additional tax receipts from 2028 and will be included in finance minister Rachel Reeves' 2025 budget, which she will announce on Wednesday.
($1 = 0.7627 pounds)
(Reporting by James Davey; editing by Sarah Young and Mark Heinrich)
The sugar tax, also known as the Soft Drinks Industry Levy (SDIL), is a tax imposed on sugary drinks to reduce sugar consumption and combat obesity, particularly among children.
Milk-based drinks include beverages made primarily from milk, such as milkshakes and milky coffees, which may contain added sugars.
Reformulation in food production involves changing the ingredients or nutritional composition of a product, often to reduce sugar, salt, or fat content.
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