Alcohol taxation will now be determined by the strength of the drink as part of new government regulations.
- Drinks under 3.5% ABV will see decreased tax rates, while those over 8.5% remain unchanged.
- Significant tax hikes are expected for beverages like port, sherry, vodka, and red wine.
- Sparkling wine will face a reduced tax rate, unlike beer, which will see a minor increase in retail outlets but remain stable in pubs.
- The government aims to align these changes with broader public health and fiscal objectives, despite concerns from industry stakeholders.
Alcohol taxation is set to undergo substantial changes as new government regulations tie tax rates to the strength of the drink, in line with objectives to support broader UK tax and public health goals. The adjustment stipulates that drinks with an alcohol by volume (ABV) content of 3.5% or below will benefit from lower tax rates, while those exceeding 8.5% will see no alterations in taxation regardless of whether they are wine, spirits, or beer.
The Wine and Spirits Trade Association (WSTA) has highlighted forthcoming tax increases for specific beverages, such as port and sherry, which will incur additional charges of £1.30 and 97p per 75cl bottle respectively. Vodka is set to rise by 76p per 70cl, and an average 12% ABV bottle of red wine will witness an increase of 44p.
In contrast, the tax rate for sparkling wine is due to decrease by 19p for a 12% ABV bottle, reversing the previous trend of higher taxation compared to still wine. Meanwhile, beer sold in shops will see a modest increase of 4p, although the tax will remain unchanged in pubs. This decision, according to Prime Minister Rishi Sunak, aims to bolster the hospitality sector by potentially lowering the price of a pub pint.
Chancellor Jeremy Hunt remarked that the newly revised duty regime seeks to modernise alcohol taxation, facilitating growth in the sector by introducing favourable conditions for low-alcohol beverages and providing financial support for small producers. However, the WSTA has expressed apprehension, stating that these measures could exacerbate inflationary pressures on consumers, particularly impacting premium spirits and wine disproportionately compared to other products.
The revised alcohol duty framework represents a significant shift towards aligning tax policy with health objectives and supporting small producers, though it raises concerns about its inflationary impact on consumers.
