The UK vaping industry is currently facing its most significant transformation since the introduction of TPD. On 1 October 2026, the new Vaping Products Duty (VPD) officially begins with a probationary period until April 2027. This isn’t just a minor administrative update; it is a fundamental shift in how e-liquid is priced, taxed, and manufactured.
For brand owners, the challenge is two-fold: how to keep products affordable for a price-sensitive consumer base, and how to prevent the new tax from draining the company’s vital cash reserves. At Xyfil, we’ve been analysing the fine print to help our partners move beyond “compliance” and toward a strategy of resilience.
Understanding the Impact: The £2.20 per 10ml Reality
To build a survival strategy, you first have to understand the numbers. The UK government has opted for a flat-rate excise duty of £2.20 per 10ml of liquid. Crucially, this applies regardless of nicotine strength—meaning a 3mg liquid is taxed at the exact same rate as a 20mg liquid.
While a few pence here and there might be manageable, the volume-based nature of the tax creates a “price shock” for larger formats. Consider the duty-only cost (before VAT) for common sizes:
- 10ml Bottle: £2.20 duty
- 50ml Shortfill: £11.00 duty
- 100ml Shortfill: £22.00 duty
When you add VAT and the standard retail markup, a 100ml shortfill could see a retail price increase of over £26. For many consumers, this moves their favourite hobby from a “cost-effective alternative to smoking” to a significant monthly expense. If your brand relies heavily on high-volume bottles, the time to diversify your portfolio is now.
Diversifying the Range: Tax-Efficient Product Innovation
As the duty makes traditional high-volume liquids more expensive, consumers will naturally look for alternatives that offer better value. Successful brands will be those that pivot their R&D toward products that provide high satisfaction with lower “tax-per-use” profiles.
The Rise of Longfills and Concentrates
Since the tax is levied on the total volume of the liquid produced or imported, moving toward Longfills (bottles containing only flavour concentrate, designed to be topped up by the user) allows brands to keep the “entry price” lower. By selling the nicotine-containing base separately in smaller, taxed increments, you give the consumer a path to affordability that a pre-mixed 100ml bottle simply cannot offer.
Exploring Nicotine Pouches and Alternatives
The Vaping Products Duty specifically targets liquids. This leaves nicotine pouches as a highly attractive, duty-exempt category for brands looking to maintain a presence in the nicotine market without the £2.20/10ml overhead. Diversifying into pouches allows you to hedge your bets against future liquid tax hikes.
Optimising for Efficiency
We are also seeing a shift toward high-efficiency Mouth-to-Lung (MTL) pod systems. These devices use significantly less liquid than sub-ohm “cloud” tanks. By focusing your brand’s marketing on salt-based pods and high-potency, low-volume liquids, you help your customers get the same nicotine satisfaction while consuming fewer millilitres—effectively lowering their tax burden.
The Hidden Threat: The Working Capital Crisis
While the retail price increase is the most visible change, the most dangerous one for your business is the impact on working capital.
Under the new excise regime, duty is generally payable at the point where the product is “released for consumption”—which usually means when it leaves the manufacturer’s warehouse.
In a traditional manufacturing model, you might hold 10,000 units of 100ml shortfills in your warehouse to ensure you never run out of stock. Under the new rules, those 10,000 bottles represent £220,000 in duty already owed or tied up. For most independent brands, having that much cash sitting on a shelf is a recipe for a liquidity crisis.
The Xyfil Solution: As-Needed Manufacturing
At Xyfil, we are positioning our UK facility to act as the financial “buffer” for our partners. We believe that this form of manufacturing is the only sustainable way for vape brands to manage cash flow post-2026.
How We’re Here to Help
1. Holding Stock in Component Form Instead of manufacturing your entire quarterly forecast into finished, taxable bottles, we help you hold your stock as “components”—separate containers of flavour concentrates, PG/VG, and nicotine. These components are not subject to the Vaping Products Duty until they are blended and packaged.
2. Manufacturing on Demand By utilising our high-speed UK production lines, we can manufacture your finished goods on a much tighter schedule. Instead of taking delivery of three months’ worth of stock, you can order smaller, more frequent batches. This means you only trigger the duty payment on the stock you are actually ready to sell.
3. Drastically Reduced Cash-in-Stock This model allows you to keep your cash where it belongs: in your business. By minimising the amount of duty-paid stock sitting in a warehouse, you reduce your financial risk and maintain the agility needed to react to market trends.
Navigating Compliance: VDS and HMRC
Beyond the financial strategy, there is the matter of the Vaping Duty Stamps (VDS). All products subject to the duty will require a physical or digital stamp to prove the tax has been paid. This adds a layer of complexity to packaging design and production.
Xyfil is already integrating VDS protocols into our production workflow. We can guide you through:
- Packaging Redesign: Ensuring your labels have the correct space and security features required by HMRC.
- Registration Support: Assisting with the information required for the April 2026 registration window.
- Audit Trails: Providing the rigorous batch tracking and reporting necessary to satisfy excise officers.
The Path Forward
The 2026 deadline might feel distant, but the structural changes required—reformulating products, redesigning packaging, and overhauling supply chains—take time. The brands that start these conversations today will be the ones that capture the market share of those who wait until it’s too late.
The UK market is entering a more mature, regulated era. With a partner like Xyfil, you can navigate these changes with a lean, tax-efficient, and highly agile supply chain.
Is your brand ready for the October 2026 shift? Contact Xyfil today to discuss our manufacturing capabilities and how we can help you optimise your product range for the new duty landscape.