Many alcoholic drinks will cost more from Tuesday after Rishi Sunak and the chancellor, Jeremy Hunt, enforced tax rises on booze.
Under the shake-up first set out by the prime minister when he was chancellor in 2021, duty will now be levied according to the strength, rather than type, of alcohol.
While most wines and spirits will rise in price as a result of duty increasing by 10.1% overall in line with last September’s inflation figure, prices will fall on drinks with lower alcoholic percentages, as well as most sparkling wine. So what do the changes actually entail?
Why are alcohol duties increasing?
Under plans first set out two years ago, the new system is supposed to encourage drinkers to cut back on their weekly units by taxing all alcohol based on strength. Previously, it had been levied based on the categories of wine, beer, spirits and ciders.
The chancellor had proposed bringing in the changes earlier this year – with alcohol duties having been frozen since 2020 – but last autumn postponed the change because of the cost of living crisis.
While drinks prices continue to rise, albeit at a slightly slower rate, the government has decided to push on with its overhaul of the system while introducing the 10.1% rise in alcohol duties overall.
How does the new system work?
Drinks with alcohol by volume (ABV) below 3.5% will be taxed at a lower rate, while drinks with an ABV of more than 8.5% will all be taxed at the same rate, whether they are wines, spirits or beer. The change means still wines below 11.5% ABV and some sparkling wines will become cheaper, but higher-strength wines will get pricier.
“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,” Hunt said.
The duty paid on draught drinks in pubs will be up to 11p lower than what drinkers can expect to pay at the shops as part of the government’s “Brexit pubs guarantee” to ensure pubs always pay less alcohol duty than supermarkets.
What prices are going up?
The increase will result in duty rising by 44p on a bottle of wine with ABV between 11.5% and 14.5%, which when combined with VAT will mean consumers will pay an extra 53p, according to the Wine and Spirit Trade Association (WSTA).
Duty on 18% cream sherry will go up by an extra 87p, with VAT adding up to an increase of more than £1 a bottle. The total tax on a bottle of port will go up by more than £1.50, the average bottle of whisky will cost £1 more, while a bottle of gin or vodka will increase by about 90p in price.
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What’s staying the same or going down?
Duty on a 4.5% beer will increase by 4p in shops but stay the same for draught pints in pubs, as the government attempts to shield the hospitality sector from price rises. A cider of the same percentage will see a 1p increase in shops but a 1p reduction in pubs.
Sunak said: “Not only will today’s changes mean that that the price of your pint in the pub is protected, but it will also benefit thousands of businesses across the country.”
How has the drinks industry reacted?
The Scotch Whisky Association director of strategy, Graeme Littlejohn, described the duty increase as a “hammer blow for distillers and consumers”, while Colin Neill, the chief executive of Hospitality Ulster, said they would be forced to raise the prices they charge for alcohol in response.
William Robinson, the managing director of Robinson Brewery, which operates 250 pubs, welcomed the difference in draught beer duty between pubs and supermarkets but said the tax increases 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.”