ICAEW warned that lowering the sugar threshold from 5g to 4.5g targets just 11% of the market and is likely to yield diminishing returns. Many of the drinks affected by this threshold change will only need to remove a fraction of a gram of sugar per 100ml to remain exempt, meaning further reformulation requires a disproportionate effort for minimal health gain.

The Institute cautioned that this approach risks penalising manufacturers that supported the original levy’s goals by reformulating, undermining the certainty businesses need from the tax system. Meanwhile, brands that did not reformulate – including top-selling drinks with over 10g of sugar per 100ml – remain entirely unaffected by the changes.

In addition, ICAEW said in its response to the consultation on the SDIL in July that while the levy is being tightened for packaged drinks, many on-premises drinks sold in cafes and fast-food outlets, often with sugar levels far exceeding those of pre-packaged soft drinks, remain entirely out of scope of the tax.

Ed Saltmarsh, ICAEW Technical Manager, VAT and Customs, said:

“The success of the original soft drinks industry levy was built on its simplicity and the clear incentive it created for reformulation. Introducing complex allowances for milk-based drinks risks undermining that simplicity.

“Furthermore, we are concerned that shifting the goalposts to 4.5g chases diminishing returns and penalises the very businesses that previously reformulated, while leaving the highest-sugar drinks on the market untouched.

“It also creates a confused tax landscape. If the government believes the health harms of sugar outweigh the nutritional benefits of milk, it raises questions about why other high-sugar categories, such as pure fruit juices and smoothies, remain entirely exempt despite often containing more sugar than the drinks being targeted by the threshold change.”

ENDS

Notes to editors:

The WHO considers fruit juices to contain free sugars, which are effectively the same as the sugars found in soft drinks.