Alcohol duty changes could see extra £3bn by 2027

The new alcohol duty system changes could see an additional £3bn raised in alcohol duties, according to the Office for Budget Responsibility (OBR)

There is just one month to go until the government’s new alcohol duty system comes into effect, which will tax alcohol based on its ABV.

The changes, marked as the most radical in 140 years, will mean that businesses will have to pay higher rates of tax, depending on the strength of the alcohol that they are selling.

From 1 August 2023, a glass of red wine could face 11p more in duty, while a pint of beer in the pub could be 3p less.

The system replaces the current alcohol duty and will introduce six standardised alcohol duty bands across all types of alcoholic products.

According to the OBR, the new system is estimated to raise £12.4bn in alcohol duties for 2022/23, rising to £15.8bn in 2027/28.

The replacement will mean that small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products. For example, low strength drinks below 3.5% ABV will be charged at a new rate of duty of £9.27 per litre.

In addition, small businesses as well as pubs and restaurants will benefit from reduced rates on qualifying products, such as draught beer and cider.

Draught relief will reduce the alcohol duty on qualifying beer and cider by 9.2% and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.

This will mean that every pint sold in pubs across the UK will pay less duty than their supermarket equivalent.

For wine producers and importers, temporary arrangements will be in place for 18 months from 1 August 2023 until 1 February 2025, to support transition to the new method of calculating duty on their products.

This will treat all wine between 11.5% and 14.5% ABV as 12.5% ABV for the purposes of calculating the alcohol duty.

Jonathan Athow, director general of customer strategy & 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.’

HMRC will also be introducing a new penalty to prohibit decanting alcoholic products subject to reduced rates for draught products – also known as draught relief.

Gareth Davies, Exchequer secretary to the Treasury, said: ‘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 to keep draught duty down, and a small new producer relief.’

More information on the new alcohol duty rates and reliefs can be found on GOV.UK

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