# When a tax rise stops raising money

url: https://whereyourmoneygoes.co.uk/when-tax-rises-lose-revenue/
updated: 22 September 2026
licence: CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/)
publisher: Tekstak Ltd

[Where your money goes](/) › Tax revenue



# When a tax rise stops raising money



Last updated 22 September 2026.
Figures refresh every night. [How each figure is worked out](/methodology/).




Tobacco is the clearest UK example. The duty actually collected per cigarette has risen from 17.81p in 2006–07 to **61.90p in 2025–26**, up 247.6%. Over the same period the number of cigarettes on which duty was paid fell **75.1%** from its 2009–10 peak, and real-terms tobacco duty receipts are **41.6% below their 2011–12 peak**. Raising the rate no longer raises the revenue, because the base is shrinking faster. Receipts are HMRC's; the cigarette volumes are from HMRC's Tobacco Bulletin; real terms use ONS CPIH in 2024–25 prices.



Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [HM Revenue and Customs](https://www.gov.uk/government/statistics/tobacco-bulletin), [Office for National Statistics](https://www.ons.gov.uk/economics/inflationandpriceindices). Not updated since 6 April 2025







## Why would a higher rate raise less money?



Revenue is the rate multiplied by the base: how much of the thing is taxed. Raise the rate and, other
things equal, revenue rises. But a higher rate can shrink the base — people buy less, buy elsewhere,
or buy illegally. If the base falls faster than the rate rises, revenue falls. Economists call the
general shape of this the Laffer curve; the argument is never about whether it exists but about where
on it a particular tax sits, and that is an empirical question with a different answer for every tax.



The UK publishes enough data to check three of them directly. Below, each duty's receipts are put into
real terms using CPIH, so inflation is not mistaken for growth.



Real-terms figures run to 2024–25 because CPIH, the deflator, has not published a
complete financial year since then. Cash figures run a year further.





## Tobacco: the rate went up, the base collapsed



+247.6%
Duty collected per cigarette, 2006–07 to 2025–26



Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [HM Revenue and Customs](https://www.gov.uk/government/statistics/tobacco-bulletin).



-75.1%
Cigarettes taxed, since the 2009–10 peak



Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/tobacco-bulletin).



-41.6%
Real receipts, since the 2011–12 peak



Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [Office for National Statistics](https://www.ons.gov.uk/economics/inflationandpriceindices). Not updated since 6 April 2025



£7,567m
Tobacco duty, most recent year
▼


Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk).







**Tobacco: the rate per cigarette against the number of cigarettes taxed**










**The numbers behind this chart**




| Financial year | Receipts | Cigarettes (million) | Duty per cigarette |
| --- | --- | --- | --- |
| 2006–07 | £8,149m | 45,760 | 17.81p |
| 2007–08 | £8,094m | 45,940 | 17.62p |
| 2008–09 | £8,219m | 43,180 | 19.03p |
| 2009–10 | £8,813m | 49,097 | 17.95p |
| 2010–11 | £9,144m | 45,678 | 20.02p |
| 2011–12 | £9,551m | 42,813 | 22.31p |
| 2012–13 | £9,681m | 37,932 | 25.52p |
| 2013–14 | £9,531m | 35,414 | 26.91p |
| 2014–15 | £9,548m | 32,661 | 29.23p |
| 2015–16 | £9,485m | 30,971 | 30.63p |
| 2016–17 | £8,909m | 28,246 | 31.54p |
| 2017–18 | £8,827m | 26,948 | 32.76p |
| 2018–19 | £9,290m | 26,289 | 35.34p |
| 2019–20 | £8,804m | 25,866 | 34.04p |
| 2020–21 | £9,964m | 23,151 | 43.04p |
| 2021–22 | £10,278m | 23,245 | 44.22p |
| 2022–23 | £10,004m | 19,814 | 50.49p |
| 2023–24 | £8,804m | 16,480 | 53.42p |
| 2024–25 | £7,927m | 13,578 | 58.38p |
| 2025–26 | £7,567m | 12,225 | 61.90p |





Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [HM Revenue and Customs](https://www.gov.uk/government/statistics/tobacco-bulletin).




The two lines move in opposite directions and have done for years. That does not prove the tax caused
the fall: smoking rates were declining before the sharpest duty rises, vaping took a large share of the
market, and HMRC's own estimates put a substantial slice of consumption in the illicit market, which
pays no duty at all. All three shrink the taxed base, and only one of them is a health outcome the
policy was aiming at.



[Work out the duty on alcohol and tobacco](https://howlongisit.co.uk)





## How do the three duties compare?




**Duty receipts in real terms, 2024–25 prices**










**The numbers behind this chart**




| Financial year | Tobacco duty | Alcohol duties (all four) | Fuel duty |
| --- | --- | --- | --- |
| 2006–07 | £13,334m | £12,948m | £38,591m |
| 2007–08 | £12,942m | £13,275m | £39,822m |
| 2008–09 | £12,683m | £13,071m | £37,985m |
| 2009–10 | £13,359m | £13,660m | £39,709m |
| 2010–11 | £13,482m | £13,854m | £40,187m |
| 2011–12 | £13,575m | £14,265m | £38,090m |
| 2012–13 | £13,436m | £14,184m | £36,877m |
| 2013–14 | £12,957m | £14,213m | £36,543m |
| 2014–15 | £12,834m | £14,100m | £36,502m |
| 2015–16 | £12,692m | £14,301m | £36,963m |
| 2016–17 | £11,761m | £14,725m | £36,878m |
| 2017–18 | £11,353m | £14,713m | £35,853m |
| 2018–19 | £11,700m | £15,253m | £35,449m |
| 2019–20 | £10,903m | £14,659m | £34,060m |
| 2020–21 | £12,241m | £14,872m | £26,012m |
| 2021–22 | £12,179m | £15,542m | £30,775m |
| 2022–23 | £10,898m | £13,555m | £27,348m |
| 2023–24 | £9,087m | £12,993m | £25,723m |
| 2024–25 | £7,927m | £12,616m | £24,360m |





Figure as of 6 April 2025. Source:
[HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [HM Revenue and Customs](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk), [Office for National Statistics](https://www.ons.gov.uk/economics/inflationandpriceindices). Not updated since 6 April 2025





| Duty | Peak year | Peak receipts | Latest year | Latest receipts | Change from peak |
| --- | --- | --- | --- | --- | --- |
| Tobacco duty | 2011–12 | £13.6bn | 2024–25 | £7.9bn | -41.6% |
| Alcohol duties (all four) | 2021–22 | £15.5bn | 2024–25 | £12.6bn | -18.8% |
| Fuel duty | 2010–11 | £40.2bn | 2024–25 | £24.4bn | -39.4% |




Each has fallen in real terms, for different reasons. Tobacco's rate rose steeply while its base
collapsed. Fuel duty is the opposite case: the [rate has been frozen since 2011](/fuel-duty/)
and cut in 2022, so inflation alone has eroded it, and the base is only now starting to shrink as
electric cars arrive. Alcohol sits in between, with the 2023 reform moving revenue between the four
separate duties, which is why they are shown here as one total.





## What does this mean for fuel duty?



Fuel duty is heading for the same problem from the other direction. Its base — litres of petrol and
diesel sold — shrinks as the fleet turns electric, and the rate cannot rise fast enough to make that
up without a political fight the last thirty years suggest governments lose. That is the reason for the
[pay-per-mile charge on electric cars](/ev-pay-per-mile-tax/): it moves the tax onto a base
that does not disappear.





## What this does not show





### What the data does support



- Raising tobacco duty has not raised real tobacco revenue for over a decade.
- The taxed base can shrink faster than the rate rises.
- A frozen rate loses real revenue quietly, without a vote.





### What it does not support



- It does not show the rate rise caused the whole fall: health policy, vaping and the illicit market all shrink the base.
- It does not mean cutting the rate would raise more: that requires the base to respond symmetrically, which is untested here.
- Revenue is not the only aim. For tobacco, falling consumption is the point of the policy, and lost revenue is an accepted cost.








## Common questions


Can raising a tax rate reduce the revenue it raises?
Yes, when the taxed base shrinks faster than the rate rises. UK tobacco duty is an example: the duty collected per cigarette rose 247.6% while the number of cigarettes taxed fell 75.1%, and real receipts are 41.6% below their 2011–12 peak.How much does tobacco duty raise in the UK?
£7.6bn in the most recent financial year published by HMRC.Is this the Laffer curve?
It is the same idea, applied to one tax with published data. The argument is not whether higher rates can reduce revenue but where a given tax sits, which is an empirical question with a different answer for each tax.





## Use this data



Everything on this page is published under
[CC BY 4.0](https://creativecommons.org/licenses/by/4.0/). You may
republish it, including commercially, if you credit Tekstak Ltd and link back to
this page.



### Download



- [Tobacco duty receipts by financial year (CSV)](/data/receipts-tobacco.csv)
[JSON](/data/receipts-tobacco.json)
- [Fuel duty receipts by financial year (CSV)](/data/receipts-fuel.csv)
[JSON](/data/receipts-fuel.json)
- [Cigarette clearances by financial year (CSV)](/data/tobacco-clearances.csv)
[JSON](/data/tobacco-clearances.json)
- [CPIH, financial year averages (CSV)](/data/cpih-financial-year.csv)
[JSON](/data/cpih-financial-year.json)

- [All data and field definitions](/data/)




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## Sources for this page




| Source | Publisher | Figures as of | Updated |
| --- | --- | --- | --- |
| [HMRC tax receipts and National Insurance contributions for the UK](https://www.gov.uk/government/statistics/hmrc-tax-and-nics-receipts-for-the-uk) | HM Revenue and Customs | 6 April 2025 | annual |
| [Tobacco Bulletin](https://www.gov.uk/government/statistics/tobacco-bulletin) | HM Revenue and Customs | 6 April 2025 | annual |
| [Consumer Prices Index including owner occupiers’ housing costs (CPIH)](https://www.ons.gov.uk/economics/inflationandpriceindices) | Office for National Statistics | 6 April 2024 | annual not updating |






## Related questions



- [What is the UK fuel duty rate, and how did it get there?](/fuel-duty/)
- [What is the electric car pay-per-mile tax, and what happens to fuel duty?](/ev-pay-per-mile-tax/)
- [How much tax is in petrol?](/tax-on-petrol/)
- [How much of my energy bill is tax?](/tax-on-energy-bills/)






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## Related pages

- [What is the UK fuel duty rate, and how did it get there?](https://whereyourmoneygoes.co.uk/fuel-duty/)
- [What is the electric car pay-per-mile tax, and what happens to fuel duty?](https://whereyourmoneygoes.co.uk/ev-pay-per-mile-tax/)
- [How much tax is in petrol?](https://whereyourmoneygoes.co.uk/tax-on-petrol/)
- [How much of my energy bill is tax?](https://whereyourmoneygoes.co.uk/tax-on-energy-bills/)

## More from this publisher

- [UK tax calculators](https://howlongisit.co.uk)
- [Work out your own figure with our UK tax calculators](https://howlongisit.co.uk)

Published by Tekstak Ltd under CC BY 4.0. Figures last updated 22 September 2026.