Alcohol Duty rate changes explained

13 July, 2023

On 1st August 2023, the Alcohol Duty system will be simplified, taxing all alcoholic drinks based on their alcohol by volume (ABV) - the biggest reform of alcohol duties for more than 140 years.

This new system will replace the current Alcohol Duty system, which consists of four separate taxes covering beer, cider, spirits, wine and made-wine.

Starting in August, there will be six standardised alcohol duty bands across all types of alcoholic products, and these bands will apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

Small businesses as well as pubs and restaurants will receive reduced rates on qualifying products, such as draught beer and cider.

We've reviewed the information provided by the government and created a summary to help members understand the new system and the potential impact these changes may have on their businesses.

As always, please always check the website for full information.

Duty changes in line with ABV

While some products have previously been measured on volume only – such as still wine and cider – from 1st August all alcohol products will be measured by alcohol volume or ABV.

Source: Matthew Clark.

Source: Enotria&Coe 

What does this mean for beer?

Draught beer and cider products are protected by a 9.2% discount offered on items in 20ltr containers that are less than 8.5% and use a dispense system, meaning that, for example, the duty on a 50ltr 4% lager will not change.

However, the standard rate of duty on packaged beer that is 3.5% ABV and above will rise by 10.1%. This will increase the price of a 24 pack of 330ml 4.5% lager by £0.69p per case.

What does this mean for wine?

Most wine will see an increase of £0.44 per 75cl bottle, or a 20% increase in the duty paid (£2.67 vs the current £2.23). This increase will apply to wines with an ABV between 11.5% and 14.5%.

Wines with an ABV above 15% will see a duty increase of £0.97 (+44%) per 75cl bottle, and this increase gets bigger the higher the alcohol percentage – duty on fortified wines of +20% ABV will go up by £1.30 to £4.28 per 75cl bottle.

On the other hand, wine under 11.5% ABV will be treated more favourably. Duty on wine at 10% ABV, for example, will be £0.09 less than the current rate (at £2.14 per 75cl bottle).

The further abolishment of separate duty rates for sparkling and still wine means that from 1st of August, a bottle of Champagne or sparkling wine will have its duty reduced by £0.19, bringing it down to £2.67 and in line with a still wines.

To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for 18 months from 1st August 2023 until 1st February 2025.

What does this mean for spirits?

The standard rate of duty for spirits over 22% ABV is also increasing by 10.1% in line with RPI. This will put the price of a standard bottle of 40% ABV up by £0.81 per bottle. There are new bandings for products with less than 22% ABV and less than 3.5% which will reduce duty vs current rates.

Small Producer Relief

The reforms will replace and extend the existing Small Brewers Relief with Small Producer Relief. This means that all small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.

Draught Relief

There will also be a reduced rate for draught products – known as Draught Relief. This will reduce Alcohol Duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.
The reforms will mean that pints in pubs will have less duty than their supermarket equivalent, in line with the government’s Brexit Pubs Guarantee.

Encouraging low-strength alcoholic products

To support innovation and responsible drinking, low strength drinks below 3.5% ABV will be charged at a new lower rate of duty.

In our latest blog post, Regency Commercial Manager (Beverage) and multi-site pub owner and operator, Martin Renwick shares his thoughts on how the duty changes will affect consumer drinking habits and the impact this may have on operators - with suggestions on how to maximise the sales opportunity presented by the changes, as well as protecting margins.

You can read Martin's blog post here: BLOG: How the alcohol duty changes will impact hospitality operators

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