Milk-based drinks have enjoyed an exemption to the UK Soft Drinks Industry Levy (SDIL) since it was introduced in 2018. However, the UK government has this week announced that this exception will be removed.
This means that milk-based beverages will become subject to the UK’s sugar tax: which will apply to drinks with more than 4.5g sugar per 100ml when the exemption ends.
However, it’s more difficult to calculate the levy on milk-based drinks and plant-based alternatives because of the different types of beverages within the category and the presence of lactose, a naturally occurring sugar.
Here’s what we know about the new rules so far.
Scope of the levy: Milk-based and milk alternatives will now be included
Since the UK’s Soft Drinks Industry Levy was introduced in April 2018, milk-based drinks have enjoyed an exemption, providing they contain at least 75ml milk per 100ml. This was done so to not disincentivize calcium consumption, particularly among children and young people.
To ensure parity, plant-based alternatives have enjoyed the same exception: including soya or almost milk (providing they contain at least 120mg calcium per 100ml).
However, the UK government now says that young people only get 3.5% of their calcium intake from milk-based drinks, meaning that the health benefits do not outweigh the harms from excess sugar.
That exception will now be removed when the changes come into effect.
The levy applies only to pre-packaged goods: so milk-based drinks sold in cafes will not be subject to the levy.
Lactose allowance: How this will be calculated
Milk and dairy products contain naturally occurring sugars such as lactose: which contribute to overall sugar content but do not represent the same public health concern as added sugar.
Consequently, a ‘lactose allowance’ will be introduced to account for the naturally occurring lactose in milk.
The lactose allowance for milk-based drinks will apply to drinks irrespective of their percentage milk content.
A drink will be liable to pay the SDIL if, after its bespoke lactose allowance has been determined and deducted from total sugars, its remaining sugars exceed the lower SDIL threshold.
The lactose allowance will not apply to sugars when lactose is added as an additional ingredient; if it is contained in whey powder; or all sugars in lactose-free dairy products where lactose has been broken down to glucose and galactose through the addition of lactase (hydrolysed lactose).
How milk substitutes will be treated
The government will remove the current exemption which applies to all milk substitute drinks with a minimum calcium content of 120mg, irrespective of their sugar content.
However, some milk substitute drinks, such as rice or oat drinks, contain sugars that are released during the manufacturing process. Sugars derived from the principal or ‘core’ ingredient, such as oats in ‘oat milk’ (meaning those naturally present or released during manufacturing) will be excluded from the definition of added sugars in SDIL legislation and thus will be outside the scope of the levy.
Fermented milk and yogurt drinks will be included
The consultation revealed two opposing views on fermented milk (yogurt) drinks: producers consider these drinks to have a higher nutritional value than other milk-based drinks; but health academics raised the alarm over high sugar content in some of these drinks and a lack of evidence that probiotic qualities outweigh high sugar content.
The outcome is that fermented milk drinks will be included in the levy from 2028: including but not limited to yogurt drinks, lassis, kefirs, drinks with disease risk reduction claims (including plant stanols and sterols), and pre- and probiotic drinks (including those with functional health claims).
A distinction is made between yogurt that is eaten (including ‘drinking yogurt’) and yogurt drinks. Yogurt drinks will be included; yogurt that is eaten will not.
Schedule for technical details
A technical consultation on the draft legislation will be published in 2026. Changes to legislation introduced in a subsequent Finance Bill. ahead of the legislation taking effect on 1 January 2028.
Implementation date
The new rules were originally envisioned to come into effect in on April 1, 2027. However, the government has considered representations from industry about the challenges in achieving reformulations targets by this date. It also acknowledges additional challenges posed to manufacturers by the new Deposit Return Scheme.
Consequently, the proposed implementation date is now January 1, 2028. This gives manufacturers just over two years to reformulate.