HMRC has published a series of policy papers and draft legislation setting out tax measures for inclusion in Finance Bill 2026. The proposals cover Air Passenger Duty, Alcohol Duty, the Soft Drinks Industry Levy, Vehicle Excise Duty, Landfill Tax and VAT, with several measures open for technical consultation.
The UK government has published a series of draft Finance Bill 2026 measures proposing changes across several indirect taxes and duties, including the Soft Drinks Industry Levy, Air Passenger Duty (APD), Alcohol Duty, Landfill Tax, VAT and Vehicle Excise Duty (VED). The proposals also include new legislation affecting electric vehicles and technical amendments to tax administration.
Subject to consultation and parliamentary approval, the measures are scheduled to take effect between April 2027 and January 2028, providing businesses and affected sectors with advance notice of the planned legislative changes.
Draft soft drinks industry levy amendments 2028
This legislation outlines upcoming adjustments to the Soft Drinks Industry Levy, specifically detailing changes to how sugar content is calculated and which beverages are taxed. A key modification includes lowering the sugar threshold from 5 grams to 4.5 grams per 100 milliliters, a change set to take effect on 1 January 2028.
It also clarifies the status of milk-based drinks and plant-based alternatives, specifying that while natural lactose is generally excluded from sugar counts, certain additions like added sugar or lactase-treated sugars may still trigger the levy. Furthermore, drinking yoghurts are explicitly defined as non-beverages to exempt them from the tax, provided they meet specific fermentation standards.
These draft measures grant tax commissioners the authority to regulate how quantities are measured and how specific liquids are classified under the law.
Air passenger duty: business jet higher rate legislation
This draft legislation outlines upcoming changes to the Air Passenger Duty, specifically targeting the use of private aviation.
Starting in April 2027, a significantly higher tax rate will be applied to individuals traveling on business jets, with costs varying based on the flight’s destination. The legislation provides a legal definition for these aircraft, identifying them as non-scheduled planes where departure details are specifically arranged for the traveler. Additionally, it clarifies that certain tax exemptions for children will not apply if they are flying on these private vessels.
Alcohol duty: penalties for non-compliance and late payment
This legislative draft outlines structural updates to the legal framework governing financial penalties for alcohol-related tax non-compliance.
By amending the Finance Acts of 2009 and 2021, the legislation transitions the enforcement of alcohol duty returns and payments into a modernised regulatory system. It specifies precise deadline requirements for tax submissions and establishes how HMRC assessments will trigger fines if obligations are missed.
Furthermore, it grants the Treasury the authority to determine exactly when these new administrative rules will officially take effect.
UK air passenger duty rates and guidance
This official government guidance outlines the Air Passenger Duty (APD) rates that aircraft operators must pay for travelers departing from the United Kingdom. The total tax is determined by the final destination of the passenger’s journey, which is categorised into four distinct geographic bands ranging from domestic to long-haul travel. Additionally, the amount owed is influenced by the class of travel, with different pricing for reduced, standard, and higher rates based on seat spacing and aircraft size. The legislation provides specific future pricing tables for 2026 and 2027, including unique rules for direct long-haul flights originating in Northern Ireland. Operators are instructed on how to properly calculate their liabilities and submit the necessary tax returns to HMRC.
Draft finance bill: electric vehicle excise duty legislation
This draft legislation outlines the introduction of a new mileage-based tax system for electric and plug-in hybrid vehicles, referred to as the eVED charge.
Under these proposed amendments to existing road traffic laws, owners of these vehicles would be required to pay an additional duty calculated by multiplying their estimated annual mileage by a specific per-mile rate. The bill establishes strict protocols for mileage reporting, including provisions for adjustments, refunds, and “top-up” payments based on actual distance driven. To ensure compliance, the bill introduces new criminal offences related to odometer tampering and the use of software designed to falsify distance records. Furthermore, authorities would be granted expanded powers to inspect vehicles suspected of carrying faulty or compromised odometers. These measures essentially transition low-emission vehicles into a taxable framework that mirrors the duty traditionally collected from fossil fuel consumption.
Legislative amendments to dredging exemptions for landfill tax
This legal draft outlines proposed modifications to the Finance Act 1996 regarding the taxation of waste removed from waterways. The new provisions specifically address how dredged materials and non-liquid additives are categorised when they are deposited at landfill sites.
Under these rules, different components of a single waste deposit can be treated as separate disposals for tax calculation purposes if they meet specific criteria. This allows for a more granular assessment by authorities to ensure that tax exemptions or rates are applied accurately to the distinct types of material involved. These regulatory updates are scheduled to take effect for all relevant waste disposals occurring on or after 1 April 2027.
VAT treatment of qualifying deposit schemes
This legislation outlines a legal framework for the Value Added Tax (VAT) treatment of deposit return schemes established under environmental laws in the UK and Scotland. Under these rules, the initial deposit paid by a consumer is excluded from the taxable value of the goods at the point of sale. Instead, the scheme administrator is responsible for paying VAT specifically on the surplus funds created when deposits are collected but never reclaimed through refunds.
To facilitate this, the legislation mandates that administrators must register for VAT and outlines strict notification procedures for beginning or ending their operations. Furthermore, it empowers tax authorities to set regulations for record-keeping and specific methods for calculating tax obligations related to these environmental initiatives.
VED exemption for search and rescue vehicles
This legislative draft outlines a new tax exemption for search and rescue vehicles under the Vehicle Excise and Registration Act 1994. To qualify for this financial relief, a vehicle must be operated by a charity and utilised primarily for lifesaving missions. Additionally, the law requires that these vehicles are clearly labeled with identifying signage on both sides to verify their official purpose. The legislation further clarifies the legal definitions of eligible organisations and activities by referencing existing value-added tax codes. These updated regulations are scheduled to be implemented for all qualifying licenses starting on 1 April 2027. This measure serves to reduce the operating costs for emergency response organizations performing essential public services.
Consultation timeline
Several of the draft measures remain open for technical consultation before being included in Finance Bill 2026. Consultation deadlines fall between 6 September 2026 and 7 September 2026, depending on the measure, with implementation dates ranging from 1 April 2027 to 1 January and 1 April 2028.
