A new minimum excise tax (MET) will raise prices of the cheapest cigarettes.
During his Budget speech today, chancellor Philip Hammond said the so-called floor on cigarettes is based on a pack price of £7.35.
An MET is effectively a floor price that will hike the price of low-cost brands in an effort to encourage smokers to quit rather than switch to something cheaper.
The rate will be set at £268.63 per 1,000 cigarettes, the Treasury said, and will take effect from 20 May to "promote fiscal sustainability".
Before the budget, Will Hill, head of legal and external affairs for British American Tobacco (BAT) UK, said a minimum excise tax will disproportionately hit lower earning smokers by only increasing the cost of value-for-money brands.
"It comes on the back of the annual tobacco duty increase and the price increases associated with the new minimum pack sizes, and may well see many smokers pushed towards the black market," Hill said.
The MET was originally set out by Hammond's predecessor George Osborne last year.
Duty rates on tobacco products will increase by two per cent above the rate of inflation, as announced in last year's Budget. This will come into effect from 6pm today.
Giles Roca, director general of the Tobacco Manufacturers’ Association (TMA), said:
Taxation on tobacco in the UK is already the highest in the EU meaning that prices in the UK are up to four times higher than in other European countries.