- Alcohol Prices Set to Rise Due to Tax Reform
- Higher Duties for Wines and Spirits, Lower for Low-Alcohol Beverages
- Critics Warn of Inflationary Impact and Challenges for Businesses
Tuesday could see an increase in the price of many alcoholic beverages as a result of significant tax reform.
According to what the Treasury calls new “common-sense” principles, tax is levied based on the alcohol content of a beverage.
Most wines and spirits will increase, but lower-alcohol beverages and most effervescent wine will decrease.
The taxes on draught pints will remain unchanged, a measure intended to support taverns.
Since 2020, alcohol duties have been suspended. Chancellor Jeremy Hunt delayed these changes, originally set for February, due to the cost-of-living issue.
The government is raising alcohol tariffs by 10.1% and revamping the system because prices are still rising, albeit slowly.
Wine, spirits, and beer with an alcohol by volume (ABV) above 8.5% will be taxed at the same rate. However, beverages with an ABV below 3.5% will be taxed at a lower rate.
Consequently, sparkling wine, which was previously taxed at a higher rate than still wine, will be 19p less expensive per standard-strength bottle if retailers carry on the tax changes by lowering prices. A pre-mixed gin and tonic can be 5p less expensive.
According to the Wine and Spirits Trade Association (WSTA), the tax on a typical bottle of still wine with an alcohol by volume (ABV) of 12% will increase by 44 pence, while the tax on wine with an ABV of 15% will increase by 98 pence.
Spirits and fortified wines, such as sherry and port, will experience significant price increases.
The chancellor stated, “The changes we’re making to the way we tax alcohol catapult us into the 21st century, reflecting the popularity of low-alcohol beverages and boosting growth in the sector by financially supporting small producers.
The government stated that the UK’s exit from the EU made the new system of duties possible and that it would promote “broader UK tax and public health objectives.
Rishi Sunak said cutting draught beer and cider duties would “reduce the price of a pint” and boost companies.
Due to the adjustments, pub draught beer will be 11p cheaper than grocery beer. This measure was announced in the Budget earlier this year.
William Robinson, managing director of Robinson Brewery, which operates 250 taverns, applauded the disparity in draught beer duty between pubs and supermarkets but stated that rising taxes on other alcoholic beverages could be passed on to customers.
He stated, “There is a benefit of a lower duty rate on pubs, but what will increase are wines and spirits…we’ll need to figure out how to pass those increases on to the consumer or how to absorb them.”
He stated that he believed enterprises would form their own opinions. “In the final analysis, duty is a tax. It is extremely difficult to determine how to absorb all of that. Because it is not a cost of commodities,” he said. “Ultimately and generally, duty is simply passed through because it is a form of tax collection.”
“Inflationary suffering”
The WSTA claims this is the greatest tax rise on a standard bottle of wine in nearly 50 years.
According to the trade association, the government chose to “impose more inflationary misery on consumers.”
It warned that other economic pressures, such as high inflation and “skyrocketing prices” for glass, would make it impossible for many businesses, particularly smaller ones, to survive these changes.
“Ultimately, the government’s new duty regime discriminates against premium spirits and wine more than other products,” said Miles Beale, chief executive of the WSTA.
He added that wines from hotter countries, where the sun generates naturally higher alcohol levels, would be penalized.
The alcohol excise reform is being implemented in two phases, with the second adjustment arriving in February 2025 and implementing a full sliding scale of tax levels based on alcohol content.
The British Retail Consortium’s July retail price survey showed a 7.6% increase, down from 8.2% in June.
