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Tax on alcohol sold in the UK is changing from Saturday, with an increase to match inflation, a cut to duty on draught pints and a shake-up in how wine is levied. So what is changing, which drinks will be cheaper and which might cost more?
What is alcohol duty?
Alcoholic drinks are taxed according to their strength, or alcohol by volume (ABV), expressed as the percentage of pure alcohol in a product and shown on the label.
Under the system that came into force in August 2023, alcohol duty is levied on drinks that are more than 1.2% ABV, with a higher rate paid for every extra 0.1% in strength in order to promote better public health by discouraging the sale of cheap, high-strength drinks.
The tax is typically paid by producers or when drinks are imported, with the cost then passed on to the consumer.
What is changing this weekend?
From 1 February a 1.7% reduction in the duty on draught drinks sold in licensed venues with an ABV below 8.5% comes into force – equivalent to 1p less on a pint of an average strength beer.
The government hopes the move announced by the chancellor, Rachel Reeves, in her autumn budget will support the struggling hospitality industry, as such products account for more than 60% of drinks sold in pubs.
Meanwhile, duty on non-draught alcohol will rise 3.6% in line with inflation as measured by the retail prices index (RPI).
There is also an end to the temporary 18-month “easement” period in place for wine, under which all varieties between 11.5% and 14.5% ABV paid a flat £2.67 tax rate – increasing the number of tax bands for wine in this range from one to 30.
Wines below 11.5% or above 14.5% were already taxed according to strength. Now all will be taxed according to ABV, with the amount of duty paid a bottle rising by 2p for every 0.1% increase.
What prices are going up?
Prices on about 43% of wines will increase as a result of the easement period ending, according to analysis by the Wine and Spirits Trade Association. The tax on a bottle of wine with an ABV of 14.5% will increase by 54p. Red wines will be most affected by the changes given their higher alcohol content, with the industry expecting prices on 75% of them to go up because of the shake-up.
The increases in wine duty may not sound like a huge jump, but will cost the consumer millions in the next year, according to Sarah Coles, head of personal finance at Hargreaves Lansdown.
“If you take a 250ml glass of wine at 13%, you’ll pay 8p more – 4p of this is the RPI rise in duty and 4p is due to the rule change.
“Eight pence might not feel like it’s going to break the bank, but the changes are expected to cost us an extra £10m in the coming tax year.”
The inflation-linked duty increases mean an 11% ABV 250ml glass of wine will cost 3p more. They will also push up the price of spirits, with a bottle of gin going up by 32p and a shot of 40% whisky up by 1p. While there is a cut for draught pints, that exception does not apply to bottled beer and cider. A 500ml container of 5% ABV cider will be 1p higher.
What prices will fall?
The Treasury estimates its change to tax on draught drinks will cut the hospitality industry’s overall duty bill by £85m. For regular pub-goers, the draught duty change may result in only a modest saving on pints. However, it is likely punters won’t notice any difference as publicans may not necessarily pass on the savings.
What has been the reaction to the changes?
Some organisations lauded the move as a positive step by incentivising people to consume lower-strength alcohol while supporting pubs. Wine sellers have warned their customers that prices could rise and their choices may be diminished.
Michael Kill, the chief executive of the Night Times Industry Association, said the measures were “meaningless for businesses already buckling under the strain of rising costs and taxation”, and do not go far enough to support the UK hospitality sector.
