After a brief decline following the UK's ban on single-use e-cigarettes, sales have rebounded successfully. However, with a new tax policy about to be implemented, the e-cigarette industry is facing a new round of changes, and retailers and consumers are actively adjusting their strategies.
Details of the new tax policy: Tax rates and timelines clarified.
Under the new regulations, an e-cigarette tax will officially take effect on October 1, 2026. An additional 22 pence tax will be levied per milliliter of e-liquid, on top of the existing 20% VAT. For example, a 10ml high-capacity e-cigarette will increase in price by £2.20 after the new policy takes effect.
More importantly, starting April 1, 2027, all e-cigarette products on the market must bear a customs duty stamp. However, retailers will be granted a six-month grace period to clear existing unlabeled inventory before April 1, 2027. Tom Power, Senior National Account Manager at Phoenix 2 Retail, advises retail outlets such as gas stations and convenience stores to prepare in advance to avoid inventory backlogs.
Market Trend Forecast: Two Types of Products Will Become Highly Sought After
1. Nicotine bags: Tax-free advantages become more apparent, sales remain stable with slight increases.
In this tax reform plan, nicotine bags have been explicitly exempted from taxation, a policy benefit that has made them a focus of industry attention. Bauer stated, "Over the past few years, the market share of nicotine bags has steadily increased, and the tax exemption policy will further solidify its advantage, ensuring stable consumer demand even if sales volume doesn't increase."
Currently, Velo and Nordic dominate the nicotine bag market. Bauer suggests that retailers prioritize these two brands and, once the market foundation is solid, introduce brands such as Fumi and Zyn, as well as high-intensity product lines like Killa and Pablo, to meet the needs of different consumers.
2. 2ml refillable cartridges: Cost-effective , making them the top choice for budget-sensitive consumers.
Faced with rising prices, consumer purchasing behavior will also change. Bauer analyzed, "As taxes and fees accumulate and prices climb, consumers will reconsider their acceptance of the 22 pence per milliliter tax." For example, a 10ml high-puff e-cigarette priced at £12.99 will see a significant price increase after the new policy, and some consumers may switch to 2ml refillable cartridges to control their spending by reducing the cost per purchase. Furthermore, oral nicotine products may become a more popular choice to avoid taxes.
Industry Impact: Less impactful than a one-off ban; Ireland's experience offers valuable lessons.
It is worth noting that the market volatility caused by this e-cigarette tax is expected to be far less than that caused by the previous ban on disposable e-cigarettes. According to Bauer, disposable e-cigarettes previously accounted for 80% of the market value, and the ban would have "almost required a complete overhaul," while the impact of the tax reform is relatively mild.
Meanwhile, Ireland took the lead last month in imposing taxes on e-cigarette liquids, and its market response will provide important reference for the UK industry. Ball stated, "We will be closely monitoring market developments in Ireland over the coming weeks and months, learning from their experience." The core objective of Ireland's tax is to reduce youth use of e-cigarettes, and it is also part of its overall plan to impose stricter restrictions on the sale, flavors, and advertising of e-cigarettes.
Retailers still have ample time to adjust to policy changes. Bauer suggests, "The tax won't be officially implemented until October 2026, so everyone has plenty of time to prepare, but they should communicate with suppliers as early as possible. We've already started discussions with several large companies, and with the grace period, the tax reform implementation should be relatively smooth."
Following the ban on disposable e-cigarettes, pod systems and high-output devices have become the two main drivers of market growth, with brands such as Lost Mary, SKE, and IVG performing exceptionally well. With the implementation of e-cigarette taxes, 2ml refillable cartridges and nicotine pouches are expected to become new growth engines, further evolving . For consumers and retailers, anticipating market trends is crucial to gaining a competitive edge during policy adjustments.
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