SDIL to lower sugar threshold and cover dairy

As of 25 November the UK Government has announced changes to the Soft Drinks Industry Levy (SDIL). 

Broadly, the changes are: 

• Lowering the SDIL threshold from 5g to 4.5g sugar per 100ml 

• Removing previous exemptions on milk-based and milk substitute drinks 

These changes are due to implemented on 1 January 2028 and are expected to raise an additional £40 million a year in tax receipts. This gives manufacturers two years to reformulate their products, or face the levy. 

Lowering the SDIL threshold 

Drinks containing between 4.5g and 7.9g sugar per 100ml will now fall into the lower levy band. The current rate for this band is 19.4p/litre. The rate of 25p/litre for drinks above 8g sugar per 100ml remains the same.  

The expansion of the levy band captures 11% of total UK soft drinks sales that contain 4.5g to 4.9g of sugar per 100ml. Previous consultations discussed a stricter expansion to 4g, however, based on industry feedback around the technical challenges, plus the costs and risks involved in reformulation for businesses, a compromise was struck. 

“It remains the government’s position that there is room to go further to reduce sugar consumed from soft drinks, and that SDIL is a tried and tested method of encouraging this reformulation.” 

The inclusion of milk-based drinks 

Further changes to the SDIL result in pre-packaged milk-based drinks coming under the levy. This includes products such as bottled milkshakes and coffee drinks. ‘Open-cup’ products, for example, milkshakes prepared in cafés, restaurants and bars remain out of scope. Similarly, plain cow’s milk and other milk drinks without added sugar will continue to be exempt. 

Milk-based drinks have historically been controversial as milk contributes positive nutrients such as calcium to the diet. However, the government has justified the inclusion based on data that young people only get 3.5% of their calcium intake from milk-based drinks, which often contain added sugars and contribute to excess calorie intake. Therefore, this positive nutrient intake has been balanced against the potential harms from excess sugar. 

Lactose allowance 

Following consultation suggestions on the differing health outcomes of lactose compared to ‘added sugars’ a ‘lactose allowance’ will be introduced. This means that lactose will not count as an ‘added sugar’ when calculating the liability for the threshold.  

Currently, the lactose allowance is approximated at 4g/100ml for milk-based products, but this could change following a technical consultation due to be published next year. 

All lactose from allowable sources will be added up to give the product’s bespoke lactose allowance. Producers will then deduct this allowance from the drink’s total sugars to determine liability, based on the remaining sugars. 

No lactose allowance will be given for sugars from the following non-allowable sources: 

• Lactose added as an additional ingredient 

• Lactose contained in whey powder 

• All sugars in lactose free dairy products where the lactose has been broken down to glucose and galactose through the addition of lactase (this process is used to sweeten some products and to create lactose-free products) 

Lactose free milks without added sugar will remain excluded from the levy. This follows the general approach, as in current SDIL legislation, that drinks without added sugar are out of scope of the levy. 

Milk substitutes 

Previously, milk substitute drinks with a minimum calcium content of 120mg, irrespective of their sugar content, did not fall under the SDIL. As with milk-based drinks, they will now be incorporated. 

Akin to drinks without added sugar, milk substitutes where sugars are only released from their principal ingredient during processing will be out of scope. For example, the sugars released from oats during the production of oat milk will not be counted as ‘added sugars’. This is to maintain consistency between the treatment of milk substitute drinks without added sugar and plain animal milks. 

Further categorisation 

Within scope: yoghurt drinks, fermented milk drinks, lassis, kefirs, drinks with disease risk reduction claims (including plant stanols and sterols), and pre and probiotic drinks (including those with functional health claims).  

Out of scope: Yoghurt that is eaten (including ‘drinking yoghurt’), dissolvable powders, alcohol-free beer or wine, and toddler milks. 

Concerns were raised by public health respondents during the consultation phase that an opportunity could be missed to reduce the sugar content of toddler milks. However, it was noted that “the government does not consider the SDIL to be an appropriate lever with which to address the concerns raised and therefore will not be bringing toddler milks into the levy.” 

IGD opinion 

The consultation, which ended on 21 July 2025 with over 170 responses, shows that the government is willing to listen to a range of views to reach a compromise that supports their health objectives detailed in the 10 Year Health Plan for England, while fostering conditions that allow the industry to continue to grow. 

Independent analysis has often highlighted the SDIL as a highly effective policy tool. Its design incentivised product reformulation, and in some cases created a price discrepancy when tax was passed on the consumer – inspiring consumer behaviour change in multiple ways. This led to significant sugar reduction and innovation without negatively impacting the overall soft drinks market growth. 

However, as the government looks to expand its public health strategy, it’s worth considering that while the soft drinks levy proves that targeted taxation can be a powerful engine for change, broader food taxation remains a complex topic that could widen inequalities.  

Summary 

On 1 January 2028 the SDIL threshold will lower from 5g to 4.5g sugar per 100ml and pre-packaged milk-based and substitute drinks will no longer be excluded. 

The government has also stated that it “commits to not make any further changes to SDIL this Parliament.”