UK ‘Milkshake Tax’: Why Packaged Lattes Are Joining Britain’s Sugar Crackdown
In the middle of a cost-of-living squeeze, the quiet chill of a supermarket fridge has become a political battleground. Next to the colas and energy drinks sit neat rows of bottled lattes, thick milkshakes, and protein drinks in bright colors. For years they dodged the UK’s sugar tax. Now they are in the firing line.
On the eve of a major Budget, the government has moved first on health, not income tax. Packaged milk-based drinks with added sugar will be pulled into the same net as fizzy drinks. At the same time, the sugar threshold for the levy will fall. A few grams of sugar per 100 milliliters now separate a normal drink from a taxed one.
This is about more than milkshakes. It is about how far a government should go to shape everyday choices, how it pays for its promises, and who ends up footing the bill.
Bullet Point Summary
The UK will extend its sugar tax (Soft Drinks Industry Levy) to packaged milk-based drinks such as bottled milkshakes, sweetened lattes, and some protein drinks.
The lower sugar threshold for the tax will be cut from 5g to 4.5g of sugar per 100ml, tightening the rules on all soft drinks.
Plain cow’s milk, unsweetened milk alternatives, and “open-cup” drinks made fresh in cafés and bars will remain exempt.
A “lactose allowance” will exclude most naturally occurring milk sugar from the calculation, focusing the tax on added sugar.
The changes are due to start in 2028 and are expected to raise around £40–£45 million a year in extra revenue, while supporting long-term anti-obesity goals.
Background: From Fizzy Drinks to “Milkshake Tax”
The UK sugar tax, formally the Soft Drinks Industry Levy, arrived in 2018. It was pitched as a simple idea: if drink makers load their products with sugar, they pay more tax. Many chose to cut sugar instead, reformulating recipes to slip under the threshold and avoid the charge.
The levy has two tiers. Drinks with mid-range sugar pay one rate per liter; those heavy with sugar pay a higher one. Over time, the share of soft drinks above the threshold has dropped sharply as brands adjusted. Public health modeling suggests this cut calories from diets and helped prevent thousands of cases of childhood obesity and tooth decay.
But there was a gap. Milk-based drinks, including thick supermarket milkshakes and ready-to-drink coffees, were exempt as long as at least three-quarters of the drink was milk. The logic was that milk is nutritious and should not be lumped in with fizzy soda.
The market took advantage. As awareness of the sugar tax grew, confectionery-style milk drinks filled the shelves. They carried as much – and sometimes more – sugar as the colas that now faced the levy. Parents could dodge the fizzy drinks aisle but still end up with a dessert in a bottle in the trolley.
Health campaigners argued this loophole undercut the spirit of the policy. A child’s pancreas does not care whether the sugar comes in cola, coffee, or chocolate milk. Now the government has listened.
Core Analysis: What Is Actually Changing?
The New Rules in Plain Terms
The government plans two key moves:
Extend the levy to packaged milk-based and milk-substitute drinks with added sugar.
This pulls in bottled milkshakes, sweetened iced coffees, sugary yogurt drinks, and many protein shakes.
It also captures some plant-based drinks if they have sugar added on top of what is naturally present.
Lower the sugar threshold from 5g to 4.5g per 100ml.
Drinks that used to sit just below the line will now be taxed unless reformulated.
Two tax bands will still apply, but more products will fall into them.
To avoid punishing natural milk sugar, officials have built in a “lactose allowance”. Most of the lactose found naturally in milk-based drinks will be stripped out of the sugar count. The levy is aimed at added sugar, not the baseline sugar present in milk itself.
Meanwhile, “open-cup” drinks – the latte made fresh by a barista, the milkshake blended at a café – stay outside the scope. So do plain cow’s milk and unsweetened oat, soy, or almond drinks whose sugar only comes from the core ingredient and not from added syrups.
Health Strategy or Stealth Tax?
The move sits in a broader push to shift the UK from cure to prevention. Ministers argue that obesity is now one of the country’s main health threats, driving heart disease, cancer, and diabetes. That means pressure on the National Health Service, lost productivity, and rising welfare costs over a lifetime.
Government analysis suggests the tighter sugar rules could shave a tiny number of calories off daily intake per person – one or two kilocalories for adults and children. On paper that looks trivial. Over millions of people and many years, models suggest it adds up to billions of pounds in health and economic benefits.
Critics see something else: an extra cost at the checkout dressed up as health policy. With households already squeezed, any tax that pushes up the price of drinks sold in supermarkets feels like another squeeze on working families. Some retailers warn customers are already trading down to cheaper options; further taxes will either raise shelf prices or force them to shrink portions.
The truth is that the policy is both a health nudge and a revenue raiser. The timing – announced on the eve of a Budget where income tax is not expected to rise – is no accident.
The Fiscal Angle: Meeting Tough Rules
The Chancellor has promised to balance the day-to-day budget and start to bring debt down as a share of national income by the end of the decade. Those self-imposed fiscal rules leave limited room for big giveaways.
Without touching income tax rates, the government is hunting for smaller, targeted revenue streams. Extending the sugar levy is one of them. Official documents suggest the milkshake and latte changes will bring in around £40–£45 million a year once fully in place.
On their own, those numbers do not transform the public finances. But alongside other ideas – freezing tax thresholds further, tinkering with high-value property taxes, changing pension salary sacrifice, and exploring a per-mile charge on electric vehicles – they help build an argument that the government is funding its plans fairly and without breaking headline promises.
Winners, Losers, and Market Shifts
Who loses?
Manufacturers of sugar-heavy milk drinks who choose not to reformulate will pay more tax or risk losing customers if they put prices up.
Shoppers who stick with the same branded milkshakes and ready-made lattes will likely face higher prices or smaller bottles for the same money.
Grocery retailers worry about weaker demand in chilled drinks fridges already under pressure.
Who wins?
Health campaigners gain a policy that supports their long fight to align all sugary drinks under one regime.
Producers of low- or no-sugar drinks stand to benefit as reformulation accelerates and customer demand shifts.
Cafés and bars, whose fresh “open-cup” drinks remain outside the levy, gain a small price advantage over ready-to-drink bottles and cans in supermarkets.
The most likely response from bigger brands is the same as last time: reformulate. That could mean less sugar, more non-sugar sweeteners, and a wave of “no added sugar” labels in the milk drink aisle.
Why This Matters Now
Everyday Life
For most people, this story lands not in Westminster but in the weekly shop. A chilled caramel latte grabbed at a petrol station. A chocolate milkshake tossed into a lunchbox. A protein shake marketed as a health product but loaded with syrup.
If producers decide to pass the levy on in full, each of those products could cost a little more. The difference on a single bottle might be measured in pennies. But for families already watching every pound, another nudge at the till may feel like a quiet tax rise, not a health intervention.
At the same time, the change could bring more honest shelves. When colas and energy drinks are taxed for their sugar but milkshakes with equal sugar escape, the system looks arbitrary. Aligning the rules signals that sugar is sugar, whatever the packaging.
Health, Inequality, and Choice
Obesity rates are highest in the poorest communities. Cheap, calorie-dense drinks and snacks crowd out healthier choices. That raises an awkward question: does a sugar levy that increases prices hit those households hardest, or does it help protect them from long-term harm?
Supporters say the levy widens freedom, not narrows it. If companies respond by cutting sugar, people get healthier products for the same price and future NHS pressure eases. If consumers switch to low- or no-sugar options, they gain long-term health at a small short-term cost.
Skeptics counter that behavior change is complex. Forcing up the price of one product may simply push people onto another cheap high-calorie option. Without wider action on food marketing, education, and income, a tax on drinks alone cannot fix the problem.
Politics and Signaling
The “milkshake tax” is also a political signal. The government wants to show it is serious about prevention, serious about fiscal discipline, and serious about fairness in how it raises revenue.
By targeting products seen as non-essential and often indulgent, ministers hope to avoid the backlash that would come from overt rises in income tax or VAT. Instead, they frame the change as a nudge backed by evidence: a modest tweak to a policy that appears to be working.
Opponents will argue it is a soft way of squeezing consumers without admitting it. The debate will run beyond Budget week.
Impacts
The Supermarket Parent
Picture a parent in a supermarket after school. The child begs for a bottled strawberry milkshake. Under the current rules, the drink may sit outside the levy despite containing more sugar than a taxed lemon-lime soda. In a few years, that same bottle might be more expensive – or reformulated to contain less sugar and sweeteners instead.
The parent’s choice shifts. Do they pay more for the treat, switch to a low-sugar version, or pick flavored water instead? Policy meets real life in that moment at the fridge.
The Small Retailer
A small grocery owner watches customers trade down to value brands. Their margins are tight; energy and rent costs have climbed. A new levy on packaged milk drinks means either higher wholesale prices or fresh complexity in what they stock.
They might cut back on premium milkshakes and promote cheaper low-sugar variants instead. It is a tiny decision in one shop. Scaled up across thousands of outlets, it shapes what people see first and what they buy on impulse.
The Drinks Manufacturer
A big dairy brand holds a strategy meeting. The finance team shows the projected cost of the levy on its top-selling milkshake line. The marketing team worries about price-sensitive shoppers. The R&D team suggests cutting sugar and adding non-sugar sweeteners to dodge the charge.
The last time the sugar tax hit fizzy drinks, many brands quietly changed recipes. Some customers complained about taste; most adapted. The same story may play out again in the chilled aisle, with milk drinks creeping down toward the new 4.5g threshold.
The Long-Term Health Picture
On an individual day, a one- or two-calorie drop in intake is invisible. No one feels different. But multiplied across tens of millions of people and many years, the arithmetic starts to matter. Fewer cases of obesity mean fewer strokes, fewer amputations, fewer people leaving work early due to ill health.
That is the promise behind the milkshake tax: small nudges, applied to a whole population, bending the curve of chronic disease. Whether it delivers on that promise depends on how industry, retailers, and consumers respond.
A Small Tax With Big Symbolism
Extending the sugar levy to packaged milkshakes and lattes is not a revolution. It is a targeted adjustment to a policy the country already lives with. Prices may rise a little. Recipes will likely change. Shelves will look different.
Yet the symbolism is larger than the sums involved. In one move, the government ties health to fiscal strategy, signals a tougher stance on sugar across the board, and tests how far voters will accept subtle taxes on everyday treats.
For now, the battle lines are simple. Supporters see a modest, evidence-informed step toward a healthier nation. Critics see another cost piled on working households in the middle of a squeeze. The next time you walk past the chilled drinks aisle, the argument will be staring back at you in bright plastic bottles.
