Tax jumps on wine and spirits but falls on fizz

A major shake-up of the way alcohol is taxed could leave many drinks costing more from Tuesday.

Under what the Treasury says are new "common-sense" principles, tax is being levied according to a drink's strength.

Duty will increase overall, with most wines and spirits seeing rises, but will fall on lower-alcohol drinks and most sparkling wine.

Taxes on draught pints will not change, an additional measure designed to support pubs.

Alcohol duties have been frozen since 2020. These changes were originally scheduled for February this year but were postponed by Chancellor Jeremy Hunt as the cost-of-living crisis continued.

Now with prices still rising, though at a slower rate, the government is going ahead with a 10.1% rise in alcohol duties, and is also overhauling the system.

Drinks with alcohol by volume (ABV) below 3.5% will be taxed at a lower rate, but tax on drinks with ABV over 8.5% will be taxed at the same rate, whether it is wine, spirit or beer.

As a result, sparkling wine, which was previously taxed at a higher rate than still wine, will be 19p cheaper, for a standard-strength bottle, if retailers pass on the tax changes by lowering prices. A can of pre-mixed gin and tonic would be 5p cheaper.

Tax on a typical bottle of still wine with ABV 12% will go up by 44p, but on wine with 15% ABV, tax will rise by 98p, according to the Wine and Spirits Trade Association (WSTA).

Spirits and fortified wines, such as sherry and port, will see steep rises.

"The changes we're making to the way we tax alcohol catapults us into the 21st century, reflecting the popularity of low-alcohol drinks and boosting growth in the sector by supporting small producers financially," the chancellor said.

The government said the new system of duties had been made possible by the UK's departure from the EU, and that it would support "wider UK tax and public health objectives".

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Prime Minister Rishi Sunak said lower duties on draught beers and ciders would "reduce the price of a pint" and support pubs.

Tax on draught beer in pubs will be up to 11p lower than tax on supermarket beer as a result of the changes - a measure that was announced in the Budget earlier this year.

William Robinson, managing director of Robinson Brewery, which operates 250 pubs, welcomed the difference in draught beer duty between pubs and supermarkets but said rising tax on other alcoholic drinks could be passed on to customers.

He told BBC Radio 4's Today programme: "There is clearly a benefit there of a lower duty rate on pubs but what will be going up is wines and spirits, they will be increasing…we'll have to all work out how we manage to pass those increases on to the consumer or how we can hold those increases and absorb them."

He said he thought individual businesses would take their own view. "At the end of the day, duty is a tax. It isn't a cost of goods so it is very hard to work out how you can absorb all of that," he said. "Ultimately and generally, duty is simply passed through because it is form of tax collection."

'Inflationary misery'

The WSTA said the measures represented the biggest tax rise on a standard bottle of wine for nearly 50 years.

The trade association said the government had chosen to "impose more inflationary misery on consumers".

It warned that other economic pressures, including high inflation and "rocketing prices" for glass, would mean that many businesses, especially smaller firms, would not be able to stay afloat following these changes.

"Ultimately, the government's new duty regime discriminates against premium spirits and wine more than other products," WSTA chief executive Miles Beale said.

Wine from hotter countries, where the sun naturally produces higher alcohol content, would be penalised, he added.

The overhaul of alcohol excise is being introduced in two stages, with a second adjustment coming in February 2025, which will apply a full sliding scale of tax levels according to alcohol content.

The British Retail Consortium said its latest monthly survey of shop prices showed that prices were rising more slowly in July (at 7.6%), compared to June when they were rising at 8.4%.