What is an Excise Duty in United Kingdom?

An excise tax is any duty which is paid on the manufactured goods which is imposed or levied at the manufacturer end, rather than at sale. Although, at times, excise is referred to as a tax whereas, it is specifically a duty because tax is imposed or levied on an individual whereas duty is levied on a particular good. It is also considered as an indirect tax which means the producer or the manufacturer, who pays the excise duty to the government, holds all the right to increase the cost of the manufactured item, if he wishes so, in order to recover his loss and it is the eventual buyer of the good who has to pay the price. Also, an excise duty is imposed in addition to other taxes like Sales Tax or Value Added Tax (VAT).

What is an Excise Duty in United Kingdom?

However, an excise duty is different from a Sales Tax or Value Added Tax in four ways, such as:

  • An excise is a duty not a tax whereas Sales Tax or VAT is a tax.
  • An excise is a per unit tax i.e. it costs a specific amount for a volume or unit of the item purchased, whereas a Sales Tax or Value Added Tax (VAT) is an ad valorem tax and directly proportional to the price of the good.
  • An excise is applicable to narrow range of products wherein Sales or VAT is applicable to relatively broad range of products.
  • An excise is typically heavier, accounting for a higher fraction of the retail price of the targeted products.

Examples of excise duties are taxes on gasoline and fuels, tobacco and alcohol.

The etymology of the word excise is derived from the Dutch accijns, which is believed to be derived from the Latin accensare, which means “to tax”. Excise duty has served various political as well as financial ends however it was the definition of Samuel Johnson in 1775 which gave it a different meaning altogether. As per his definition, an excise duty is a hateful tax levied upon the commodities and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid. As a result of which, excise duty is typically directed towards three broad categories of harm, such as:

  • Health risks from abusing toxic substances, which includes tobacco and alcohol.
  • Environmental damage, also known as green tax, which includes fossil fuels such as petrol.
  • Socially damaging or morally objectionable activity, also categorized as sin tax or vice tax, which includes gambling, and at places where it is legal, might also include activities like prostitution including solicitation and pimping.

It is very important to mention that the money raised through the excise duty may be utilized in addressing specific social causes which are associated with the product or the service on which it is levied. For example, tobacco tax revenues might be spent on the government anti-smoking campaigns or healthcare for cancer etc.

In the United Kingdom, the following forms of excise are levied on goods and services:

  1. Air Passenger Duty – As per Finance Act 1994
  2. Aggregates Levy – As per Finance Act 2001
  3. Alcohol Duties i.e. Beer Duty, Wine Duty, Cider Duty, Spirits Duty – As per Alcoholic Liquor Duties Act 1979
  4. Bingo Duty – Betting and Gaming Duties Act 1981
  5. Climate Change Levy – Finance Act 2000
  6. Gambling Duties i.e. General Betting Duty, Pool Betting Duty, Remote Gaming Duty – Finance Act 2014.
  7. HGV Road User Levy – HGV Road User Levy Act 2013
  8. Hydrocarbon Oil Duty – Hydrocarbon Oil Duties Act 1979
  9. Landfill tax – Finance Act 1996
  10. Machine Games Duty, previously Amusement Machine License Duty – Finance Act 2012
  11. Tobacco Duty - Tobacco Products Duty Act 1979
  12. Vehicle Excise Duty – Vehicle Excise and Registration Act 1994

What is a Custom Duty in United Kingdom?

A custom duty is basically a tariff or tax imposed usually on the import and rarely on the export of goods and the commercial items which are not cleared through the customs is held in a customs area, also called a bonded store, until it is cleared or processed. Every country has its own laws and regulations for the import and export of the goods into and out of a country.

In other words, a custom duty or due is the indirect tax which is levied on the import and exports of goods in an international trade and a duty which is levied on the items which are being imported is called as an import duty whereas a duty which is levied on the items which are being exported is called as an export duty.

What is the difference between Excise and Custom Duty?

For simple and logical understanding of the word tax, it is simply a revenue generation method for the government and it is through the income or revenue generated through the taxes, that the government is able to run the state. Duty which is also an indirect tax can be called a tax levy on the items or goods which are manufactured in the country and also on the items which are imported from another country.

What is the difference between Excise and Custom Duty?

Main difference between custom duty and excise duty can be defined as below:

  • The duty which is levied on the goods which are manufactured in the country is called excise duty whereas the duty which is levied on the goods which are imported from a foreign country is called as custom duty.
  • Excise duty is imposed along with Vat and Sales tax and is valued ad valoreum, which means that the excise duty is calculated taking into account the number of goods or the volume of the goods whereas custom duty of any good is calculated by its assessable value and each product has been given a value or code which is four to ten digits.

On 18th April 2005, Customs & Excise was merged with the Inland Revenue and formed a new department, Her Majesty’s Revenue & Customs (HMRC).

Tax and Customs for Goods Sent from Abroad:

In case you are ordering something from a foreign country, the item or good has to go through the customs to ensure that it is legally allowed to enter the country and does not fall under banned or restricted items and in order to collect your item, you have to pay a certain amount of tax and duty i.e. the custom charges on it.

Banned and Restricted Goods are those items which you cannot bring into the United Kingdom and in case you do, it will be seized by the government whereas you will be fined as per the law. These include items such as:

  1. Illegal drugs
  2. Offensive Weapons, such as flick knives
  3. Self-Defense sprays such as pepper spray and CS gas.
  4. Endangered animal and plant species.
  5. Rough diamonds.
  6. Indecent and obscene materials.
  7. Personal imports of meat and dairy products from most non-EU countries.
  8. Firearms, explosives and ammunition, unless you have a special license to bring them in UK.
  9. Goods or items suspected of infringement i.e. pirated copies of movies and music.
  10. Food and plant products if they aren’t free from pests and diseases and are not for your personal use.

Excise Duty on the Items in the United Kingdom:-

In case you are sent alcohol or tobacco from outside the European Union, you will be charged Excise Duty on the items as per the current rates and if it is sent from the European Union, excise duty will be included in its price and in case if that is not the case, your product will be seized. Alcohol or tobacco items will be seized in case they are:

  1. Spirits is over 35 centiliters without a UK duty stamp.
  2. Cigarettes or hand-rolling tobacco without UK health warnings or fiscal marks.

Excise Duty on the Items in the United Kingdom

Tobacco Duty

You pay different rates of tobacco duty on cigarettes, cigars and other tobacco products such as:

Tobacco Product Rate
Cigarettes 16.5% of the retail price plus £4.16 on a packet of 20
Cigars £2.59 on a 10g cigar
Hand rolling tobacco £5.24 on a 25g packet
Other smoking tobacco and chewing tobacco (eg pipe tobacco) £2.85 on a 25g packet

Beer Duty

Beer duty depends on the beer’s strength or alcohol by volume (ABV).

Strength (ABV) Beer Duty Rate Per Litre for each % of Alcohol
More than 1.2%, up to 2.8% 8.42 pence
More than 2.8%, up to 7.5% 19.08 pence
More than 7.5% 24.77 pence
More than 1.2%, up to 2.8% 8.42 pence

For example, if you buy a pint of beer of 8% strength lager so the beer duty you pay is 24.77 pence * 8.0 = 198.16 pence per litre.

Cider Duty

Cider duty is paid on cider and perry and how much cider duty you pay depends on its strength and whether it is still or sparkling.

Type of Cider or Perry Strength (ABV) Rate per litre
Still More than 1.2%, up to 7.5% 40.38 pence
Still More than 7.5% but less than 8.5% 61.04 pence
Sparkling More than 1.2%, up to 5.5% 40.38 pence
Sparkling More than 5.5% but less than 8.5% 279.46 pence

Wine Duty

How much wine duty you pay depends on the strength of the wine and whether it is still or sparkling and wine duty for the wine of more than 22% ABV at the same rate as spirits.

Type of Cider or Perry Strength (ABV) Rate per litre
Still More than 1.2%, up to 4% 88.93 pence
Still More than 4%, up to 5.5% 122.30 pence
Still More than 5.5%, up to 15% 288.65 pence
Still More than 15%, up to 22% 384.82 pence
Sparkling More than 5.5% but less than 8.5% 279.46 pence
Sparkling More than 8.5%, up to 15% 369.72 pence

Spirit Duty

Spirit duty is £28.74 per litre of pure alcohol.

For example, the spirit duty on a 1 litre bottle of 40% ABV vodka is 40% of £28.74 i.e. £11.50.

Fuel Duty Rates

Fuel duty rates depend on the type of fuel.

Type of Fuel Rate
Petrol, diesel, biodiesel and bioethanol 57.95 pence per litre
Liquefied petroleum gas (LPG) 31.61 pence per kg
Natural gas used as fuel in vehicles, eg biogas 24.70 pence per kg
‘Fuel oil’ burned in a furnace or used for heating 10.70 pence per litre

Gambling Duty Rates

Type of gambling Duty Rate
Bingo Bingo Duty 10%
Casino games Gaming Duty Between 15% and 50%, depending on how much money the casino makes
Normal betting at a bookmaker’s General Betting Duty 15%
Financial spread betting General Betting Duty 3%
Other types of spread betting General Betting Duty 10%
Pool betting (eg football pools) Pool Betting Duty 15%
National Lottery tickets Lottery Duty 12%
Fruit or quiz machines with a prize up to £10 that cost up to 20 pence to play Machine Games Duty 5%
All other fruit or quiz machines Machine Games Duty 20%
Online or telephone gambling Remote Gaming Duty 15%

Insurance Premium Tax

It is normally included in the cost of the insurance and it depends on the type of insurance you have opted for and who supplies it.

Standard rate of Insurance Premium tax is 10% on most types of the insurance, including car, pet and home insurance whereas there is higher rate of 20% for travel insurance, electronic goods and other household appliances such as gas central heating.

Air Passenger Duty (APD)

Air passenger duty is included in the cost of the flight ticket from the UK and how much you pay depends on the distance and class you are traveling. However, there are exceptions from Northern Ireland and Scottish Highlands and Islands.

Customs Duty on the items in the United Kingdom

Customs duty is charged on the items imported from a foreign country apart from European Union, if they are above a certain value, including the price paid for the goods and posting, packaging and insurance.

Type & Value of Goods Customs Duty
Anything under £135 No charge
Gifts worth £135 - £630 2.5%, but rates are lower for some goods.
Gifts above £630 and other goods above £135 The rate depends on the type of goods and where they came from.

Related Article: Taxes on Money Transferred from Overseas in UK

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