Image source, Reuters

We expect Chancellor Rachel Reeves to increase a series of taxes tomorrow - and, if she does, she is likely to use her fiscal rules, or targets, as justification. There are two main targets:, external

• That by 2029/30, the day-to-day budget should be in surplus. This means the government would only borrow for "investment" - for example, to build new infrastructure
• By the same year, government debt should be falling, relative to the size of the economy, compared with the previous year (2028/29). That doesn't necessarily mean the national debt will fall - just that, as a percentage of national income, it will be lower than the previous year

It's important to remember these rules are self-imposed by the government. Reeves and the Treasury could choose to change them.

The UK has persistently high rates of obesity. Official figures show nearly two-thirds of adults and a third of children are either obese or overweight, which puts them at risk of other health conditions, including heart disease, cancer and diabetes.

The sugar tax has already decreased the number of calories consumed from soft drinks, the government says, external, and according to modelling studies, may have prevented thousands of cases of childhood obesity while simultaneously cutting down on tooth decay.

Many brands moved products to a sugar level just below the 5g per 100ml levy threshold when it was introduced, to avoid the tax.

The government says introducing stricter levels for more products could go further in the fight against obesity.

As we explained in our first post, government insiders told us earlier this month that Chancellor Rachel Reeves would not raise income tax rates in the Budget.

However, she still needs to raise revenue if she is to meet her self-imposed fiscal rules. That means a series of smaller tax rises are expected tomorrow.

Applying the sugar tax to packaged milkshakes is expected to be one. Other possible changes to emerge from government corridors - though not confirmed officially - include:

• Extending the freeze on income tax thresholds until 2030 (NB - Scotland sets its own income tax). So, for example, the 40% income tax rate would begin at £50,271 for another five years, rather than rising from 2028, as is planned. That means more people pay higher rates as their pay increases
• A "mansion tax" on properties worth more than £2m. This could happen by revaluing properties in council tax bands F, G, and H. It has been reported the extra rate could be 1% on values above £2m. This would mean a house worth £3m attracting extra tax of £10,000 per year
• Changing "salary sacrifice" pension rules. Currently, when most people "sacrifice" some of their wages to put into a pension pot, they do not pay income tax or National Insurance on that chunk. The government could limit the National Insurance exemption to £2,000 a year - meaning employees and employers would pay NI on pension contributions above that amount
• A new tax on electric vehicles of 3p per mile could be imposed. This would help mitigate the fall in fuel duty as drivers move away from petrol and diesel cars

What are your thoughts on the possible tax on packaged milkshakes and coffees? And what do you want to see in tomorrow's Budget?

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The sugar tax applies to fizzy and soft drinks, including squash or cordial. There are some exemptions, although those are expected to change.

Currently, beverages that are excluded include:

• drinks that are at least 75% milk
• milk alternatives such as almond milk, soya milk
• alcohol-free beer and wine
• fruit or vegetable juices
• liquid drink flavouring that’s added to food or drinks like coffee or cocktails
• infant formula
• powdered drinks
• formulated food intended as a total diet replacement, or dietary food used for special medical purposes

Pre-packaged milkshakes and lattes are expected to be included in the tax from April 2027.

Image source, Getty Images

The "Soft Drinks Industry Levy" - widely known as the sugar tax - was introduced in April 2018, under the Conservative government.

It applies to packaged drinks with more than 5g of sugar per 100ml. There are two rates:, external

• 19.4p per litre on drinks with a sugar content between 5g and 8g per 100ml
• 25.9p per litre on drinks with a sugar content equal to or greater than 8g per 100ml

The tax has led to some fizzy drink manufacturers changing their recipes to avoid the tax. In 2024, the government said 89% of soft drinks sold in the UK did not meet the sugar tax threshold.

Currently, milk-based drinks are exempt, if they contain at least 75ml of milk per 100ml.

Last year, the government announced a review, external to look at whether the milk exemption should remain. It also looked at whether the threshold for all drinks should drop - so, for example, the sugar tax could kick in at 4g per 100ml, rather than 5g.

Those changes could be confirmed today.

In just over 24 hours, Chancellor Rachel Reeves will stand in the House of Commons and deliver her Budget, setting out the government’s tax and spending plans.

For weeks, Reeves was widely expected to raise income tax - which would have breached the manifesto that saw Labour win the 2024 election by a landslide.

Then, earlier this month, government insiders changed their tune, and said income tax would not rise after all.

Reeves, however, still needs to increase revenue if she is to meet her own fiscal rules. And so a series of other tax rises are expected – including a so-called milkshake tax.

It would mean the existing sugar tax, which mainly applies to fizzy drinks, being levied on packaged milk-based drinks. That could add a few pence to milkshakes, plus milk-based coffees – and even protein shakes.

Or – as has happened with some fizzy drinks – manufacturers may lower their sugar content to avoid the tax.

Although Reeves's big statement is tomorrow, it’s thought the sugar tax could be announced today by Health Secretary Wes Streeting. Stay with us for the latest news and analysis.