There is an ever-increasing contradiction facing Britain’s strategy for controlling tobacco: while the authorities are investing heavily in putting a stop to illegal cigarettes, the new taxes and business expenses faced by legitimate vape businesses will likely result in the regulated alternatives to smoking being less competitive.
The extent of the problem with illegal tobacco is already considerable. From April 2025 to March 2026, HMRC and the Border Force reported seizing about 1.9 billion illicit cigarettes, with an estimated revenue value of around £1.1 billion. Moreover, the Government’s own strategy on illicit tobacco admits that cheap illegal cigarettes give smokers access to an unregulated supply that can weaken the deterrent effect of high tobacco prices.
This is important since one of the reasons taxation exists is to make smoking progressively less affordable; the beneficial public-health impact of higher excise taxes can then be reduced if smokers are able to get considerably cheaper cigarettes via illegal channels.
Industry research recently brought to light by Convenience Store has also raised concerns among independent retailers, since JTI’s Pack Swap data indicates that a high percentage of the cigarettes and hand-rolling tobacco inspected were not subject to UK duty payment. Although these estimates are based on industry sources rather than official market data, they support what the government’s enforcement statistics have already shown: illegal tobacco remains deeply embedded in certain areas of the retail sector.
Illicit tobacco: much more than a revenue issue
For many years, Britain adopted a fairly practical attitude towards vaping – one that had proved successful. The government still holds the view that vaping is less harmful than smoking and that it can assist adult smokers to quit.
The effects extend past the loss of tax revenue. The government states that the illegal tobacco market is controlled by organised crime groups who are also engaged in drug trafficking, money laundering, violence and exploitation. In its 2024 strategy, it pledged over £100 million in extra funding over a five-year period and clearly acknowledged that enforcement on the supply side alone is unlikely to eliminate the trade as long as consumer demand remains strong.This raises an important question regarding tobacco harm reduction: if there is continued demand for nicotine, then what legal alternatives are smokers being advised to select? For many years, Britain adopted a fairly practical attitude towards vaping – one that had proved successful. The government still holds the view that vaping is less harmful than smoking and that it can assist adult smokers to quit. Strong evidence supports this. The most recent Cochrane living review, which included evidence up to January 2026, once again concluded that nicotine vapes are more effective at helping people to stop smoking than conventional nicotine replacement therapy. Despite this, sadly, the economics of this kind of substitution are now changing.
New vape tax pressures the wrong recipients
From 1 October 2026, all vaping liquids will have to pay a new flat-rate Vaping Products Duty of £2.20 for every 10ml, regardless of nicotine content. The Government states that the aim is to make vaping less affordable and less attractive to young people and to non-smokers while at the same time providing a financial incentive for smokers to make the switch. Tobacco duty will also increase to maintain this difference.
The difficulty lies in whether the legal market can remain sufficiently attractive after additional taxes and regulatory costs. The UK Vaping Industry Association (UKVIA) has strongly criticised separate proposals that would also remove business-rates relief from specialist vape shops, even though qualifying pubs, clubs and live music venues would receive a 20% reduction starting in April 2027.
Director General of UKVIA, John Dunne, says that viewing compliant vape retailers as businesses which contribute little to their local communities is difficult to square with Britain’s own acknowledgement of vaping as a means of quitting smoking. The association is not asking for less stringent action against illegal sellers; rather, it is urging policymakers to distinguish between responsible specialist retailers and companies that sell illicit products or supply them to minors.
A licensing scheme would be the way to go
The UKVIA is therefore advocating licensing retailers as a more appropriate solution, something it has long pushed for. With such a system, companies that meet the requirements for age verification, product standards and marketing could continue doing business, while those who repeatedly break the rules might have their licences suspended or removed altogether. The association says this would let authorities focus enforcement on misconduct rather than impose financial disadvantages on the whole sector.
That distinction is likely to matter more when duty stamps are introduced alongside the new vaping tax. Starting in October, compliant products entering the market will need stamps, and from April 2027 almost all vaping products not in duty-suspension arrangements will need one. The Government says the scheme should make it easier to identify legal products and help enforcement against illicit trade.
Safer options should remain affordable and accessible
Britain has seen substantial cuts in smoking over the last ten years, and tax measures may have been a key factor, but so have been vaping products. Meanwhile, the government itself admits it cannot deal with continued illicit demand by relying on enforcement alone.
From the point of view of tobacco harm reduction, the reasonable course of action is not to relax cigarette regulations, but to make sure that legal, lower-risk alternatives are easier and more appealing to get than combustible tobacco from the black market.
If genuine vape shops face excise duties, higher operating costs, and stricter regulation, while illegal cigarette sellers escape all three, the imbalance will, of course, become counterproductive.
A coherent tobacco policy must therefore include three interrelated components: rigorous enforcement against organised illicit trading, effective safeguards for young people, and a viable regulated market for adult smokers who want to move away from combustion. Success should not be judged merely by the extent to which nicotine products are taxed or restricted; it should be judged by whether smokers are giving up cigarettes and by whether the legal market makes it easier to make that switch than the black market does. And surely, the relevant authorities must already know all this.
