VAT on private school fees 

The government has confirmed that it will charge VAT on private school fees paid from 29 July 2024 in relation to terms starting on or after 1 January 2025. Revised draft legislation published alongside the Budget makes some significant changes to the rules, as we explained in an article published on the day.  

Carbon border adjustment mechanism (CBAM) 

The government has confirmed the introduction of a CBAM starting on 1 January 2027. This new measure will impose a carbon price on imports from sectors at risk of carbon leakage, including aluminium, cement, fertiliser, hydrogen, iron, and steel. Products from the glass and ceramics sectors will initially be excluded from the CBAM to address feasibility concerns raised during consultations. 

The proposed minimum registration threshold for the CBAM will be raised from £10,000 to £50,000. This means that only businesses importing £50,000 or more of CBAM goods over a 12-month period will need to comply with the new regulations. 

Plastic Packaging Tax 

The plastic packaging tax (PPT) rate will increase in line with the consumer price index (CPI). Starting from 1 April 2025, the new PPT rate will be £223.69 per tonne. This rate applies to plastic packaging which contains less than 30% recycled plastic and that is manufactured or imported into the UK. 

Alongside the Budget, the government published its response to the consultation on adopting a mass balance approach for PPT. The government confirmed that a mass balance approach will be allowed to account for chemically recycled plastic for PPT purposes, with the implementation date to be determined. Pre-consumer waste will no longer be classified as recycled plastic when the mass balance approach changes are introduced, closing a loophole that provided some businesses with an unfair advantage.  

Alcohol duty 

Starting 1 February 2025, the government will reduce alcohol duty rates on draught products below 8.5% ABV by 1.7%, resulting in a 1p duty reduction per pint. Additionally, the discount for small producers of non-draught products will increase, and the cash discount for small producers of draught products will be maintained, enhancing the value of small producer relief. Alcohol duty rates on non-draught products will rise in line with the retail prices index (RPI).  

Following a review by HMRC, the alcohol duty stamps scheme will be abolished. Legislation to end the scheme will be introduced in the Finance Bill 2024-25, with the scheme ending on 1 May 2025. 

Soft drinks industry levy 

The soft drinks industry levy (SDIL) rate will be increased over the next five years to reflect the 27% inflation since its introduction in 2018. From 1 April 2025, the levy will be increased annually in line with CPI. SDIL thresholds and the current exemptions for milk-based drinks and milk substitutes will also be reviewed in due course. 

Tobacco duty and vaping products duty 

A flat rate vaping products duty (VPD) will be introduced at £2.20/10ml from 1 October 2026. A technical consultation on additional compliance measures has also been published. 

A one-off increase to tobacco duty to maintain the financial incentive to choose vaping over smoking will also be introduced from 1 October 2026. A tobacco duty escalator of RPI + 2% will also be introduced for the whole of this Parliament. The duty on hand-rolling tobacco will also be increased by a further 10% (RPI + 12%) from 30 October 2024. 

Air passenger duty 

The government has announced adjustments to air passenger duty (APD) rates for 2026-27 to address below-inflation uprating in recent years. Key changes include: 

• An increase of £1 for domestic flights and £2 for short-haul destinations in economy class.
• An increase of £12 for long-haul destinations, with higher increases for premium economy and business class passengers.
• The higher rate for larger private jets will rise by an additional 50%. The government is also consulting on extending this higher rate to all private jets within the APD regime. 

From 2027-28 onwards, all APD rates will be uprated by forecast RPI and rounded to the nearest penny. 

Fuel duty 

Fuel duty rates will remain frozen for 2025-26. The temporary 5p cut in fuel duty rates will be extended by 12 months and will expire on 22 March 2026.  

Vehicle excise duty 

To support the transition to electric vehicles, the government is enhancing incentives for purchases of EVs by widening the differentials in vehicle excise duty (VED) first year rates (FYRs) between EVs and hybrid or internal combustion engine (ICE) cars. Key changes include: 

• the lowest FYR, for zero-emission cars, will be frozen from 1 April 2025 until 2029-30.
• FYRs for all other emission bands, including hybrids and ICE vehicles, will increase in 2025-26.
• standard VED rates for cars, vans, and motorcycles (excluding first year rates for cars) will be uprated in line with RPI from 1 April 2025. 

Further information 

• Policy paper: Autumn Budget 2024 – overview of tax legislation and rates 

• Policy paper: Annex A – rates and allowances