Milk-based drinks will be swept into the government’s “sugar tax” for the first time, ministers have confirmed, in a move the dairy industry warns could push up prices and unfairly penalise nutritious products.
The amendment to the Soft Drinks Industry Levy, introduced in 2018 to encourage manufacturers to reduce added sugar, will take effect on 1 January 2028 and will apply to packaged milk drinks, including some ready-to-drink coffees.
The government has also lowered the threshold at which the levy applies, reducing the permitted sugar content from 5g to 4.5g per 100ml.
While the Treasury says the change will “support public health objectives” by incentivising lower-sugar formulations, representatives from the dairy sector argue the impact could fall on consumers and farmers.
NFU Dairy Board chair Paul Tompkins said that although producers themselves are not directly taxed, “processers would be, which could feed down to farm level and impact the price producers receive at a time when they are already struggling with additional feed costs, labour shortages and looming changes to inheritance tax.”
He added that “Removing the exemption for dairy based pre-packaged drinks and putting them in the same category as fizzy pop makes no sense.”
Tompkins also warned that the proposals fail to recognise the benefits of dairy. “This proposed levy also ignores the highly nutritious value of milk.
"These drinks, made with at least 75% milk, are not only great tasting but a cost-effective way for the public to source essential daily intakes of high-quality protein, calcium, vitamins and minerals.”
Milk drinks were originally excluded from the levy after industry lobbying in 2018, with dairy organisations stressing that yoghurt- and milk-based drinks provide accessible, affordable sources of nutrients such as calcium, high-quality protein, B vitamins, iodine, zinc and phosphorus.
Following further industry feedback, the Treasury has acknowledged the unique composition of dairy and confirmed a lactose allowance will be built into the new levy structure to ensure naturally occurring milk sugars are not taxed.
The implementation date has also been pushed back to 2028 to give companies time to reformulate products to meet the stricter thresholds.
The dairy sector must now weigh the cost of reformulation against the risk of price rises once the levy comes into force.
