Autumn Budget 2021: Alcohol Duty

From 1 February 2023, HM Treasury are phasing in a number of reforms to alcohol duty.

The Alcohol Duty Review was announced as part of the 2020 Budget. In October 2020, a call for evidence was launched by the UK Government to discuss the options for potential change with industry and other groups in attendance.

The reforms listed below are some of the most radical to take place over the past 140 years and align with the UK’s departure from EU laws.

Support for pubs

  • Duty rates for draught beet and cider will be cut by 5%, taking 3p directly off a pint of beer. This will be the biggest cut to beer duty in 50 years and the biggest cut to cider duty in a century.
  • The rate on draught fruit cider and beer is to be equalised for the first time. This will end the premium rate and cut duty for draught fruit cider by 20%/13p a pint.
  • Cutting rates will mean that £100 million is put into pubs and other hospitality businesses. This will not only be supporting local communities, but will also help to encourage responsible drinking.

A simpler and fairer duty regime

  • The number of main duty rates will be cut from 15 to 6.
  • All products will be taxed in line with their alcohol by volume (ABV). This system currently used for beer and spirits will be applied for the first time to wine and cider.
  • All drinks above 8.5% ABV will pay the same rate of duty irrespective of type. This will mean that for the first time, stronger beers wines and spirits will be equal. As an example a liqueur such as Baileys will pay 41p less tax per bottle than now.
New Duty Rates – October 2021 (Source: WineGB)

Modernising duty to reflect the market

  • To reflect it’s growing popularity, sparkling wine will, for the first time in over a decade, pay the same rate of duty as still wine. The current 28% duty premium on sparkling wines will be scrapped.
  • Lower ABV spirits and fruit ciders will be subject to a modernised duty, cutting 9p off a ready to drink G&T in a can and 1p off a bottle of fruit cider.
  • The threshold for the lower strength beer rate will be extended from 2.8% to 3.4%. This takes 28p off of a pint of 3.4% ABV beer.
  • New reduced rates for low ABV ciders and spirit-based drinks below 3.5% ABV will be introduced.

Supporting the craft industry

  • A proposal is to be carried forward for a new Small Producer Relief. This will extend beyond the current Small Brewers Relief to include small cidermakers and other craft producers.
  • Other changes will be made to duty to cut the tax on sparkling cider by up to half. Tax on a 75cl bottle of a 6.5% ABV sparkling cider will reduce by £1.28.

Support for the consumer

  • There will be a freeze on duty rates for all alcoholic drinks for the third budget running.
  • This will save consumers £3 billion over the coming years. This includes:
    • 3p off a pint of beer
    • 2p off a pint of cider
    • 14p off a 75cl bottle of wine
    • 52p off a 70cl bottle of Scotch compared to the usual rises (this means Scotch duty rates will be at their lowest level since 1918, after accounting for inflation).

For further information, get in touch with one of our specialist Vineyard team on 01903 234094.