Consumers in the UK are bracing themselves for a significant increase in the price of alcohol starting this Saturday as a result of a hike in tax and duties. The hike in alcohol tax will be in line with the Retail Price Index at 3.6%. Additionally, a new system to tax wines and spirits based on their strength will be introduced simultaneously. This means that the duty on a bottle of gin is set to increase by 32p, while wine with an alcohol content of 14.5% ABV will see a price hike of 54p. These changes to excise duty and the introduction of taxing wine based on strength initially came into effect on August 1, 2023. However, the UK government provided a temporary reprieve for wines with an alcohol strength between 11.5% and 14.5%, which were taxed at a flat rate of 12.5%.
The Wine and Spirit Trade Association (WSTA) has projected that a 14.5% ABV bottle of red wine would have increased by 98p over 18 months, factoring in the new duty hikes implemented in August 2023. Looking ahead, consumers can expect further costs in April due to waste packaging recycling fees coming into effect, adding an extra 12p for a bottle of wine and 18p for a bottle of spirits. Despite these impending price hikes, there is a slight relief for drinkers as duty on draught products like pints served in pubs will be reduced by 1.7%, resulting in a one-penny discount per pint. The recent hikes in duty on wine and spirits follow the largest increases in almost 50 years, adding 20% to excise duty on over 85% of wines in the UK market and over 10% to the duty paid on full-strength spirits.
Alcohol duty is paid by manufacturers during the production process. Spirits and wines generally face higher taxation compared to ciders and beers due to their higher alcohol content. Manufacturers typically pass on the duty costs to consumers, although the decision to raise product prices ultimately lies with them. Recent data from HMRC shows a decrease of £209 million in alcohol tax receipts in the financial year up to December 2024 compared to the previous year. WSTA Chief Executive, Miles Beale, criticised the continuous tax hikes on alcohol, stating that they have a detrimental impact on both consumers and businesses, resulting in reduced consumption and income for the government.
Exchequer Secretary to the Treasury, James Murray, highlighted measures to support the pub industry and smaller breweries through draught relief and small producer relief. These initiatives aim to stimulate sector growth and align with the government’s Plan for Change to enhance financial stability for the public. Richard Naisby, Chairman of the Society of Independent Brewers and Associates, commended the increased investment in draught relief, noting its positive impact on local pubs. By introducing lower alcohol duty rates for draught beer in community establishments, the government aims to encourage support for neighbourhood establishments over larger retailers.
Hal Wilson, co-founder of Cambridge Wine Merchants, expressed concerns over the administrative burden imposed by the new tax regulations, requiring detailed calculations based on varying alcohol strengths. Wilson emphasised that the high tax rates necessitate meticulous attention to detail in business operations. The continuous rise in taxation on wines and spirits is expected to result in higher retail prices, prompting consumers to prepare for increased costs on their preferred alcoholic beverages. As the industry navigates these ongoing challenges, stakeholders will need to adapt to the evolving regulatory landscape to mitigate financial impacts on businesses and consumers alike.
The forthcoming tax changes underscore the broader implications of alcohol taxation on consumer spending habits, business operations, and government revenue streams. Stakeholders across the industry face pressures to innovate and streamline processes to adapt to changing tax policies and market dynamics. The collaborative efforts between government entities and industry representatives are essential in promoting sustainable growth and resilience within the alcohol sector. As the landscape continues to evolve, stakeholders must remain vigilant in navigating regulatory changes and consumer preferences to foster a vibrant and competitive market environment.