The Soft Drinks Industry Levy applies to packaged soft drinks of 1.2% ABV or less with added sugar and at least 5g of total sugar per 100ml. From 1 April 2026 it is £2.08 per 10 litres for drinks with 5g to under 8g of sugar per 100ml and £2.78 per 10 litres at 8g or more. It is reported and paid by the UK packager or by the business bringing the drinks into the UK, and brand owners that are not small producers must register too. Brand owners making under one million litres a year, counted with connected persons, are small producers and pay nothing.

Which drinks are liable?

The levy is in the Finance Act 2017. Section 26 defines a soft drink as a beverage of no more than 1.2% alcohol, a liquid that becomes one when diluted with water, mixed with crushed ice or carbonated, or a flavour concentrate processed in a dispensing machine. Section 31 starts the charge for chargeable events from 6 April 2018.

HMRC’s liability guidance says a drink is liable only if it meets all of these conditions:

  • sugar has been added during production, or an ingredient containing sugar such as honey, other than fruit juice, vegetable juice and milk
  • it contains at least 5g of sugar per 100ml in its ready to drink or diluted form
  • it is ready to drink, or is drunk after dilution with water, mixing with crushed ice or carbonation
  • it is bottled, canned or otherwise packaged
  • it is 1.2% ABV or less

Sugar includes sucrose, glucose, fructose, lactose and galactose, but not sweeteners such as stevia, aspartame or sucralose. That is why many producers reformulated before the levy began. Diluted drinks are reported on the ready to drink volume they make according to the dilution ratio on the pack. From 1 April 2023 flavour concentrates used in dispensing machines are also liable where the dispensed drink reaches 5g per 100ml, with the volume split between concentrates when two or more are combined.

Which drinks are exempt?

Section 30 exempts milk based drinks, which must contain at least 75ml of milk per 100ml, milk substitute drinks and alcohol substitute drinks. HMRC’s guidance adds the detailed conditions and further exclusions:

  • Milk substitutes must contain at least 120mg of calcium per 100ml, come from legumes, cereals, nuts, seeds or another plant, have most of the uses and the consistency of milk, and not be carbonated.
  • Alcohol replacements must be sold and packaged as a direct replacement for a particular alcoholic drink, not marketed to appeal to under 18s, and be made by dealcoholisation, by blending alcohol with fruit juice, or by fermentation or distillation that never exceeds 1.2% ABV.
  • Drinks sweetened only by fruit or vegetable juice, powders, liquid flavourings added to food or coffee, drinks mixed and served in an open container such as cocktails, infant formula and baby foods, total diet replacements and foods for special medical purposes are outside the levy.

Businesses that only dispense drinks into a cup or glass are not packagers.

What are the sugar bands and rates?

Band Total sugar per 100ml From 1 April 2025 From 1 April 2026
Lower rate 5g or more and less than 8g £1.94 per 10 litres £2.08 per 10 litres
Higher rate 8g or more £2.59 per 10 litres £2.78 per 10 litres

From 6 April 2018 until 31 March 2025 the rates were 18p and 24p per litre. The rate year runs from 1 April to 31 March, and HMRC’s returns notice explains that credits relating to levy paid at an earlier year’s rates currently have to be claimed by email rather than through the online return.

Who counts as a small producer?

Section 37 removes the charge on drinks produced by a small producer, and a drink is produced by the person under whose name or licensed brand it is packaged. HMRC’s registration guidance treats you as a small producer if you and anyone connected with you produced less than one million litres of liable drinks worldwide in the past 12 rolling months and will not exceed one million litres in the next 30 days.

Connected persons include a spouse or civil partner, most relatives and their spouses, business partners and their families, companies you control alone or with any of those people, and trustees of settlements you or a connected living person created. Because connected persons are counted together, splitting brands across several family companies does not create several allowances.

A small producer does not have to register. If it uses a contract packager, it can choose to register so that it has a reference number to give the packager, which then reports the drinks against that number without paying levy on them. Importers must likewise report drinks from small producers but do not pay on them, provided they hold evidence of small producer status.

Who must register, and when?

You must register within 30 days of the earliest of these points:

  • the end of the month in which you packaged liable drinks for someone else, or the date you know you will do so within 30 days
  • the end of the month in which levy became due on drinks you brought into the UK, or the date you know it will
  • the end of a month in which your 12 month production of liable drinks exceeded one million litres, or the date you know it will within the next 30 days

For imports, the levy becomes due when the drinks are first removed from a registered warehouse, made available for sale or free of charge, or received at UK premises of a business that sells liable drinks. An overseas supplier with a UK presence that arranges the import pays; otherwise the UK customer does. Hauliers and warehouse keepers who do not sell the drinks are outside the levy.

Failing to register without a reasonable excuse can lead to a penalty and is an offence; on conviction the penalty can include up to 12 months in prison (six months in Northern Ireland) and a fine of up to the greater of £20,000 and three times the levy lost. See our page on reasonable excuse for how that test is applied.

How do returns and records work?

Returns are quarterly for periods ending June, September, December and March, and the return and payment are due within 30 days of the period end. Registered businesses with nothing to report file a nil return, unless they are registered only as small producers. Packaged drinks are reported in the period they leave the packaging premises, unless they go to a registered warehouse, in which case levy is due when they leave the warehouse.

Each return reports litres by band: drinks packaged for yourself or others, drinks packaged for each small producer with its reference number, imports, and imports from small producers. Credits can be claimed for drinks exported or lost or destroyed after the levy was paid; claims relating to an earlier rate year must be made within two years of the chargeable event. Records for each period must show litres in each band, levy due, how credits were calculated and any corrections, plus delivery and removal details for every storage premises.

What does the charge look like?

Illustration only. A brewery that also makes soft drinks packages, in the July to September 2026 quarter, 40,000 litres of lemonade at 6g of sugar per 100ml and 15,000 litres of cola at 10g per 100ml. Its annual output is above one million litres, so it is not a small producer.

  • Lemonade, lower band: 40,000 ÷ 10 × £2.08 = £8,320.
  • Cola, higher band: 15,000 ÷ 10 × £2.78 = £4,170.
  • Total levy for the quarter: £12,490, due within 30 days of 30 September.

Reformulating the lemonade to 4.9g per 100ml would currently take it out of the levy, but that headroom is due to shrink.

What changes are coming?

After its 2025 consultation, the government confirmed that the lower threshold will fall from 5g to 4.5g of total sugars per 100ml, the exemption for milk based drinks with added sugar will be removed with a lactose allowance for natural milk sugars, and milk substitutes with added sugar will become liable. A technical consultation is due in 2026 and the changes are planned to take effect on 1 January 2028. Producers near 5g, and dairy brands with added sugar, should be reviewing recipes and registration now.

For other indirect taxes on drinks see our page on alcohol duty and small producer relief, and for connected party rules elsewhere in tax see connected persons. Interest on late payment is explained in our guide to HMRC late payment interest.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.