UK To Announce ‘Milkshake Tax’ As Budget Crisis Deepens

Chancellor of the Exchequer Rachel Reeves is poised to unveil a new levy on milk-based beverages in her upcoming budget.

Reeves scrapped plans Friday to raise income tax rates after updated forecasts showed the public finances were £10 billion (approx. $12.5 billion) stronger than expected. Just days later, the chancellor of the Exchequer, who serves as the U.K.’s chief finance minister overseeing tax and spending policy, shifted focus to ending the tax exemption for sugary milk-based drinks, The Telegraph reported.

Reeves plans to bring milk-based beverages under the Soft Drinks Industry Levy and lower the tax threshold from 5g to 4g of sugar per 100ml, a shift expected to take effect in April 2027 and generate between £50 million and £100 million (approx. $62 million to $125 million), according to current Treasury forecasts.

The government has shifted to smaller tax measures after dropping the proposed income tax rise. Treasury plans now include potential changes to taxes on high-value properties, electric vehicles, gambling, dividend income and milk-based drinks. Industry groups warn the tax will raise supermarket prices by up to 5% while delivering only a negligible reduction in sugar intake.

 “Tightening the Soft Drinks Industry Levy risks undermining years of investment in reformulation for little health gain,” said Gavin Partington, director general of the British Soft Drinks Association.

He said that seven in 10 drinks sold in the U.K. are already low or no sugar and claimed the reform would amount to a calorie reduction “equivalent to half a grape per person each day.”

Shadow Chancellor Sir Mel Stride blasted the proposal as a sign of desperation.

“It will see businesses that played by the rules punished, with products suddenly dragged into the tax net – all to save Rachel Reeves’s skin,” Stride said.

Government officials are weighing tax hikes and other “tough choices” to close a roughly £20 billion (approx. $24–26 billion) gap in the public finances, even as they insist the debate has nothing to do with recent questions over the prime minister’s future. Earlier this month, the finance ministry floated a proposal to raise income tax rates by 2% while reducing payroll taxes.

(Featured Image Media Credit: Diliff, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons)

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