In this section: Every tax
When a tax rise stops raising money
Last updated . Figures refresh every night. How each figure is worked out.
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 46.3% 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 2025–26 prices.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs, HM Revenue and Customs, Office for National Statistics.
Key figures
- £7.6bnTobacco duty raised down on a year earlier: −£360m (−4.5%) vs 2024–25
- 61.90pDuty collected per cigarette up on a year earlier: +3.52p (+6.0%) vs 2024–25
- 12.2bnCigarettes on which duty was paid down on a year earlier: −1,353 million (−10.0%) vs 2024–25
- −46.3%Real tobacco receipts against the 2011–12 peak After inflation (CPIH)
- −41.1%Real fuel duty receipts against the 2010–11 peak After inflation (CPIH)
Sources: HM Revenue and Customs, Office for National Statistics.
What is the short version?
- Rate times base: revenue falls when the base shrinks faster than the rate rises; the argument is about where on that curve a tax sits.
- Why the tobacco base shrank: smoking was already declining, vaping took a large share of the market, and some consumption moved to the illicit market.
- Fuel duty is the opposite case: the rate has been frozen since 2011, so inflation alone has cut real receipts by 41.1% since 2010–11.
- Alcohol sits in between: real receipts are 22.9% below their 2021–22 peak.
- What it does not show: that cutting a rate would raise more money.
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.
Tobacco: why did receipts fall as the rate went up?
Figures for the 2025–26 financial year. Source: HM Revenue and Customs, HM Revenue and Customs.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs, Office for National Statistics.
Figures for the 2025–26 financial year. Source: HM Revenue and Customs.
The numbers behind this chart
| Financial year | Receipts | Cigarettes (million) | Duty per cigarette |
|---|---|---|---|
2006–07Details for 2006–07 | £8,149m | 45,760 | 17.81p |
| |||
2007–08Details for 2007–08 | £8,094m | 45,940 | 17.62p |
| |||
2008–09Details for 2008–09 | £8,219m | 43,180 | 19.03p |
| |||
2009–10Details for 2009–10 | £8,813m | 49,097 | 17.95p |
| |||
2010–11Details for 2010–11 | £9,144m | 45,678 | 20.02p |
| |||
2011–12Details for 2011–12 | £9,551m | 42,813 | 22.31p |
| |||
2012–13Details for 2012–13 | £9,681m | 37,932 | 25.52p |
| |||
2013–14Details for 2013–14 | £9,531m | 35,414 | 26.91p |
| |||
2014–15Details for 2014–15 | £9,548m | 32,661 | 29.23p |
| |||
2015–16Details for 2015–16 | £9,485m | 30,971 | 30.63p |
| |||
2016–17Details for 2016–17 | £8,909m | 28,246 | 31.54p |
| |||
2017–18Details for 2017–18 | £8,827m | 26,948 | 32.76p |
| |||
2018–19Details for 2018–19 | £9,290m | 26,289 | 35.34p |
| |||
2019–20Details for 2019–20 | £8,804m | 25,866 | 34.04p |
| |||
2020–21Details for 2020–21 | £9,964m | 23,151 | 43.04p |
| |||
2021–22Details for 2021–22 | £10,278m | 23,245 | 44.22p |
| |||
2022–23Details for 2022–23 | £10,004m | 19,814 | 50.49p |
| |||
2023–24Details for 2023–24 | £8,804m | 16,480 | 53.42p |
| |||
2024–25Details for 2024–25 | £7,927m | 13,578 | 58.38p |
| |||
2025–26Details for 2025–26 | £7,567m | 12,225 | 61.90p |
| |||
Figures for the 2025–26 financial year. Source: HM Revenue and Customs, HM Revenue and Customs.
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.
How do the three duties compare?
The numbers behind this chart
| Financial year | Tobacco duty | Alcohol duties (all four) | Fuel duty |
|---|---|---|---|
2006–07Details for 2006–07 | £13,839m | £13,438m | £40,053m |
| |||
2007–08Details for 2007–08 | £13,432m | £13,778m | £41,331m |
| |||
2008–09Details for 2008–09 | £13,164m | £13,566m | £39,425m |
| |||
2009–10Details for 2009–10 | £13,865m | £14,178m | £41,214m |
| |||
2010–11Details for 2010–11 | £13,993m | £14,379m | £41,710m |
| |||
2011–12Details for 2011–12 | £14,089m | £14,806m | £39,534m |
| |||
2012–13Details for 2012–13 | £13,945m | £14,722m | £38,275m |
| |||
2013–14Details for 2013–14 | £13,448m | £14,752m | £37,928m |
| |||
2014–15Details for 2014–15 | £13,321m | £14,635m | £37,886m |
| |||
2015–16Details for 2015–16 | £13,173m | £14,843m | £38,364m |
| |||
2016–17Details for 2016–17 | £12,206m | £15,284m | £38,275m |
| |||
2017–18Details for 2017–18 | £11,783m | £15,271m | £37,212m |
| |||
2018–19Details for 2018–19 | £12,143m | £15,831m | £36,792m |
| |||
2019–20Details for 2019–20 | £11,316m | £15,214m | £35,351m |
| |||
2020–21Details for 2020–21 | £12,705m | £15,436m | £26,998m |
| |||
2021–22Details for 2021–22 | £12,640m | £16,131m | £31,942m |
| |||
2022–23Details for 2022–23 | £11,311m | £14,069m | £28,385m |
| |||
2023–24Details for 2023–24 | £9,431m | £13,486m | £26,698m |
| |||
2024–25Details for 2024–25 | £8,227m | £13,094m | £25,283m |
| |||
2025–26Details for 2025–26 | £7,567m | £12,435m | £24,558m |
| |||
Figures for the 2025–26 financial year. Source: HM Revenue and Customs, HM Revenue and Customs, Office for National Statistics.
| Duty | Peak year | Peak receipts | Latest year | Latest receipts | Change from peak |
|---|---|---|---|---|---|
Tobacco dutyDetails for Tobacco duty | 2011–12 | £14.1bn | 2025–26 | £7.6bn | -46.3% |
| |||||
Alcohol duties (all four)Details for Alcohol duties (all four) | 2021–22 | £16.1bn | 2025–26 | £12.4bn | -22.9% |
| |||||
Fuel dutyDetails for Fuel duty | 2010–11 | £41.7bn | 2025–26 | £24.6bn | -41.1% |
| |||||
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 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: it moves the tax onto a base that does not disappear.
What does this 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 46.3% 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
The figures belong to the bodies that published them and are used under their terms, listed in Sources for this page; most are Crown copyright under the Open Government Licence. Only our own words, analysis, charts and derived calculations are ours, published under CC BY 4.0: reuse them, including commercially, if you credit Tekstak Ltd and link back to this page.
Download
- Tobacco duty receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- Fuel duty receipts by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- Cigarette clearances by financial year (CSV) JSON HM Revenue and Customs: Open Government Licence v3.0
- CPIH, financial year averages (CSV) JSON Office for National Statistics: Open Government Licence v3.0
- All data, field definitions and licences
Embed the live figure
Paste this into your page. It updates itself every night and links back here.
Sources for this page
| Source | Publisher | Figures as of | Updated | Licence |
|---|---|---|---|---|
| HMRC tax receipts and National Insurance contributions for the UK | HM Revenue and Customs | the 2025–26 financial year | annual | Open Government Licence v3.0 |
| Tobacco Bulletin | HM Revenue and Customs | the 2025–26 financial year | annual | Open Government Licence v3.0 |
| Consumer Prices Index including owner occupiers’ housing costs (CPIH) | Office for National Statistics | the 2025–26 financial year | annual | Open Government Licence v3.0 |
Each source's figures are used under the licence shown. Our own words, analysis, charts and derived calculations are ours, under CC BY 4.0.