Chancellor Rachel Reeves’ Budget revealed an increase in national insurance contributions from employers, and will also up the tax on farm inheritance, soft drinks levy, tobacco and vapes.

Addressing parliament today, Reeves laid out the government’s new economic policy which will see the National Living Wage rise 6.7% to £12.21 an hour for those over 21s, as well as a 16.3% increase for 18 to 20 year olds to £10.00 per hour, a move set to impact grocery retailers.

Elsewhere, the Chancellor announced the axing of 100% inheritance tax relief on farms and agricultural properties valued above £1m from 6 April 2026. Instead, properties above the threshold will only be offered 50% relief.

In a crackdown on public health, Reeves revealed that the Soft Drinks Industry Levy will increase to maintain incentives for soft drinks manufacturers to reduce their sugar content.

While the Budget did not specify a new tax percentage, the decision follows the ‘sugar tax’ first being introduced in April 2018, and is currently applied at two different rates; 18p per litre for drinks with more than 5.7.9 grams of sugar and 24p per litre for drinks with 8 grams or more.

Subscribe to Grocery Gazette for free

Sign up here to get the latest grocery and food news each morning

Other Budget policies focused on public health include new legislation surrounding smoking, with the government renewing the Tobacco Duty escalator of RPI +2% (retail price index) for the remainder of Parliament and will raise duty by a further 10% on hand-rolling tobacco this year.

Reeves added that a new Vaping Products Duty will be introduced from 1 October 2026 at a flat rate of £2.20 per 10ml vaping liquid, accompanied by an equivalent further one-off increase in Tobacco Duty to maintain the financial incentive to switch from tobacco to vaping.

The alcohol industry was also dealt a blow, with the government making a decision to raise alcohol duty by retail price index (RPI) described as a “counterproductive” and “a real kick in the teeth” by the wine and spirit sector. It follows alcohol duty being frozen from March 2020 in response to the pandemic, and calls from the sector throughout this year, for the government to halt the upcoming rise.

Speaking about today’s Budget, Wine and Spirit Trade Association chief executive Miles Beale said: “The Chancellor’s decision to increase alcohol duty by RPI is a real kick in the teeth for both businesses and consumers.

“We simply cannot understand why Government has said they are trying to protect income and in the next breath raising alcohol duty in a move that is totally counterproductive.”