Alcohol Duty system overhaul – will the price of your favourite tipple be affected?

Drinkers face paying more for their glass of Chardonnay when a freeze on alcohol duty is lifted at the start of next month.

From August 1, every pint in every pub and restaurant will be subject to less tax, but at the same time the current hold on alcohol duty comes to an end.

Drink prices will go up with inflation and prices in supermarkets are likely to rise – especially for wine.

The new Alcohol Duty system will see drinks taxed based on their alcohol by volume (ABV). It replaces the current system, which consists of four separate taxes covering beer, cider, spirits and wine.

Small businesses that produce any alcoholic products with an ABV of less than 8.5 per cent will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.

Draught products in pubs cheaper than in supermarkets

Low strength drinks below 3.5 per cent ABV will be charged at a reduced rate of duty.

There will also be a reduced rate for draught products, which will reduce tax on qualifying beer and cider by 9.2 per cent, and by 23 per cent on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.

It means the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets.

Jonathan Athow, Director General of Customer Strategy and Tax Design, HMRC, said: “After listening to feedback from industry, economists, public health groups and many business owners, the new Alcohol Duty system will be based on the founding principle of taxing alcoholic products by strength, ensuring consistency across the board for the first time.

“The new system will support the Government’s public health objectives and provide extra support to small producers, pubs and the hospitality sector.”

‘System will be simpler’

Exchequer Secretary to the Treasury, Gareth Davies said: “Because we left the EU, we can make sure our alcohol duty system works for us. From next month the whole system will be simpler – the duty will reflect the strength of the drink.

“We will also protect pubs and brewers with our Brexit Pubs Guarantee keeping Draught Duty down, and a new Small Producer Relief.”

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 1 August 2023 until 1 February 2025.