Having a quick one in the pub will cost more from tomorrow (August 1) as a new alcohol tax comes into force.
Earlier this year, Chancellor Jeremy Hunt had promised a “Brexit pubs guarantee” in his Spring Budget, and froze taxes on beer.
While Brits’ pints were protected with the pledge that shaved 11p off draught beer compared to beer sold in shops, Hunt had signalled alcohol duty will increase for wine and whisky.
This means that the current blanket alcohol duty freeze that was put in place via the Autumn Budget 2020 and extended on December 19, 2022 will come to an end on August 1. Alcohol duty rates will now rise by September’s consumer price index of inflation at 10.1%.
That change will also coincide with a new system for taxing alcohol – which is launching on the same date –and means drinks will face more tax the stronger they are.
Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “Amongst all this pressure the government has chosen to impose more inflationary misery on consumers with the biggest single alcohol duty increase in almost 50 years.
“Ultimately, the Government’s new duty regime discriminates against premium spirits and wine more than other products.”
So, what is the new alcohol tax and how will the changes affect drink prices this summer?
What is the new alcohol tax?
The Government classes alcoholic drinks into four categories; beer, cider and perry, wine and wine-made, and spirits.
To date, beers and spirits were taxed according to their alcoholic strength, while the remaining two categories were taxed based on the total volume of the product.
The new alcohol duty system will see the system change, with alcoholic products being broadly taxed based on their alcoholic strength alone. The stronger the alcohol, the higher the tax.
With the Chancellor promising to support the pub industry, the Government will also be launching a “draught relief”, which will reduce alcohol duty for drinks that contain below 8.5 ABV, including beers and ciders.
The Office for Budget Responsibility is estimating that the new alcohol tax will raise £13.1 billion in the 2023-2024 financial year.
How will the alcohol tax affect drink prices?
The Government shared a list summarising how the alcohol tax increase will impact the prices of different alcoholic drinks.
This is what it outlined:
- Four per cent ABV pint of draught beer won’t increase in price.
- Four per cent ABV 500ml bottle of non-draught beer will be 5p higher.
- Five per cent ABV pint of draught cider will be 2p higher.
- Five per cent ABV 500ml bottle of non-draught cider will be 5p higher.
- 40 per cent ABV 25ml serving of whisky will be 3p higher.
- 5.4 per cent ABV 250ml can of spirits-based RTD will be 6p lower.
- 11 per cent ABV 250ml glass of still wine will be 5p higher.
The price of a bottle of wine with an ABV of more than 12.5 per cent will see a 44p increase, while a bottle of vodka and port could increase by 76p and £1.30 respectively, according to the Wine & Spirits Association (WSTA).
The impending increase has left wine and whisky producers worried about the financial impact they are about to experience.
Talking about the Government’s decision, the chief executive officer of WSTA, Miles Beale, said the “crippling” rises would cause further inflation.
He explained: “It will heap more misery on consumers. And it will damage British business, especially those in the hospitality supply chain, who are still trying to recover from the pandemic.”
How will it affect my drinks?
The alcohol duty rates are different for all drinks. According to data provided by the Wine and Spirit Trade Association, this is how the rates will change:
Vodka
A current 75cl at 37.5 per cent strength currently costs £7.54 and from August 1 will cost £8.30 - a price hike of 75p which works out at a 10 per cent increase.
Sparkling wine
A current 75cl 12 per cent strength bottle is £2.86 and will go down by 19p to £2.67
Still wine
12.5 per cent strength wine in a 75cl bottle is going up from £2.23 to £2.67, up 44p or 20 per cent
Sherry
Up a massive 44 per cent at 15 per cent strength in a 75cl bottle. Prices will go to £3.20 from £2.23
Port
Going from £2.98 to £4.27 at a price hike of £1.29
Cream liqueur
At 17 per cent strength a 70cl bottle will go down in price from £3.42 to £3.39
Pre-mixed gin and tonic
A 250ml can at 5 per cent strength is going down from 36p to 31p
Can of cider
440ml can at 4.5ml strength is going up by a penny from 18p to 19p
Pint of beer (draught)
At 4.5 per cent it is going up from 49p to 51p
