Britain’s once-lucrative “sin taxes” are losing their sting. According to UHY Hacker Young, a national accountancy firm, receipts from levies on tobacco, alcohol and gambling have fallen by 35% over the past decade, dropping to £24.2bn in 2024-25, just 2.8% of total HMRC revenues, down from 4.3% in 2015-16.
The decline reflects shifting habits as much as fiscal fatigue. Britons are drinking and smoking less, a trend encouraged by public-health campaigns, rising prices and relentless tax increases. Few consumers now doubt the cost of vice: of a £14 pack of cigarettes, £11 goes to the Exchequer. The duty on a litre of spirits above 22% alcohol is £32.69.
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For the Treasury, virtue has a price. James Simmonds, a tax partner at UHY Hacker Young, warns that “traditional sin taxes now collect a small and shrinking slice of the pie,” a gap that the Chancellor, Rachel Reeves, may be tempted to fill. With a widening budget deficit and limited room for broad-based tax hikes, ministers could again turn to moralising levies as politically palatable revenue raisers.
The gambling industry is a likely target
Despite a 7% rise in the sector’s tax bill last year, to £3.6bn, calls for tougher treatment are growing louder. Former prime minister Gordon Brown has joined a chorus of voices urging higher taxes on betting firms, which critics argue have enjoyed too light a touch. As Simmonds notes, “it has been widely rumoured that bigger taxes will come, especially those aimed at the gambling industry.”
Beyond the traditional vices, a new generation of “sin taxes” has emerged, aimed not at the weak-willed but at the wasteful. The Soft Drinks Industry Levy, introduced in 2019, and the Plastic Packaging Tax, launched in 2022, were designed as behavioural nudges as much as revenue sources. Yet their fiscal impact remains modest: together they raised just £580m last year, barely 1% of total receipts and down from £608m the year before.
Undeterred, the government has added a packaging recycling levy, while murmurs abound of further imposts on unhealthy or environmentally unfriendly products. Simmonds suggests that the Treasury “may feel there’s still room to push them up,” particularly given how little money they currently generate.
Taxes from sin have fallen 35% over the last decade
Britian’s tax code is labyrinthine
But the proliferation of targeted taxes risks sowing confusion as much as virtue. Britain’s tax code is already labyrinthine, and the patchwork of overlapping duties is steadily expanding. “The sheer number of different taxes — many with complex, sliding structures — harms business confidence,” says Simmonds. “How are companies supposed to know which products will be added to the blacklist next?”
The result is a fiscal paradox. As traditional sin taxes shrink, the temptation grows to invent new ones. Yet each new levy brings diminishing returns and greater complexity. Moreover, the moral justification that once underpinned such taxes—discouraging harmful consumption while topping up the Treasury—now collides with the awkward truth that success erodes its own base.
A decade ago, governments could rely on smokers and drinkers to fund a sliver of public spending. Today, healthier habits have made that source unreliable. The Treasury’s hunt for vice is shifting—from the pub and the tobacconist to the betting app and the plastic bottle. But unless ministers find a steadier sinner, Britain’s sin tax era may be nearing its sober end.
