The UK government has announced changes in alcohol duty based on drink strength, aligning with broad public health and tax goals.
- Drinks with an alcohol by volume (ABV) below 3.5% will see a lower tax rate, while those above 8.5% ABV will remain unchanged.
- Port, sherry, vodka, and red wine will experience notable tax increases, affecting consumer prices.
- Sparkling wine will benefit from a minor tax reduction, and beer taxes will rise in retail settings but not in pubs.
- Authorities aim to modernise the tax system, reflecting growing demand for low-alcohol beverages, despite concerns of unfair treatment towards premium products.
The UK government has introduced a new alcohol duty framework where the tax applied to beverages is determined by their alcohol content. This initiative aims to support broader public health and tax policy objectives. Specifically, drinks with an alcohol by volume (ABV) lower than 3.5% will be taxed at a reduced rate, while those exceeding 8.5% ABV will remain at the same level of taxation as before, irrespective of whether the beverage is wine, spirits, or beer.
Under these revised duties, certain beverages will face significant price increases. The Wine and Spirits Trade Association (WSTA) highlights that port and sherry will incur some of the highest additional costs, with taxes rising by £1.30 and 97p per 75cl bottle, respectively. Likewise, vodka will see a tax rise of 76p per 70cl bottle. For an average bottle of red wine, with an ABV of approximately 12%, the tax will increase by 44p.
In contrast to other adjustments, sparkling wine is expected to benefit from a small reduction in tax, making it 19p cheaper for a bottle with an ABV of 12%. Beer, on the other hand, will see a slight increase in tax by 4p per unit in off-licences and retail establishments. However, this change will not impact the taxation in pubs. The Prime Minister, Rishi Sunak, indicates that this measure is intended to bolster the hospitality sector and potentially lower the price of a pint.
Chancellor Jeremy Hunt has remarked that the introduction of this alcohol duty regime represents a leap into the 21st century, acknowledging the rising popularity of low-alcohol beverages. He further suggests that this reform will provide financial support for smaller producers, fostering sector growth. Despite these anticipated benefits, the WSTA has expressed concerns that the updated duty system could exacerbate inflationary pressures on consumers. They assert that the government’s approach discriminates against premium spirits and wines more heavily than against other products.
The new alcohol duty system marks a significant shift in UK tax policy, amid mixed responses from industry stakeholders.
