Alcohol duty changes – what it means for pubs, stores and small brewers
Up to 38,000 pubs and bars which have seen cuts in the tax they pay on the draught products they serve will be better off thanks to changes to the way that Alcohol Duty is calculated from August 1, 2023.
The cuts will make pints and other products sold on tap 11p cheaper than supermarket equivalents, in a bid to help the hospitality industry. It means they can finally compete on a level playing field with supermarkets and continue to be a key part of their local communities, according to the Government.
What are the new duty rates?
The changes are designed to modernise and simplify the Alcohol Duty system which has been in place for the last 140 years – changes the Government claims are only possible to make now the UK has left the EU.
The key changes are:
- all products taxed in line with alcohol by volume (ABV) strength, rather than different duty structures for different drinks;
- fewer main duty rates, from fifteen to six, to make it easier for businesses to grow and operate;
- there will be lower taxes on lower alcohol products – those below 3.5% alcohol by volume (ABV) in strength – a huge growth area in the drinks industry;
- all drinks above 8.5% ABV will pay the same rate regardless of product type.
This means Irish cream will fall by 3p, cans of 5% ABV ready-to-drink spirit mixers will be 6p cheaper, Prosecco will fall by 61p and 500ml of 3.4% pale ale will cost 20p less per bottle, according to Government data.
However, it also means other drinks with more than 8.5% ABV will become more expensive. For example, those partial to a port or sherry will see their favourite tipple rise by £1.30 and 97p per 75cl bottle respectively, according to the Wine and Spirits Trade Association (WSTA). Vodka will also go up 76p per 70cl bottle, and a typical 12% ABV bottle of red wine will go up by 44p.
New tax relief for small drinks producers to increase innovation
There is also new relief for small producers to help them increase innovation and add to the growth in the UK alcoholic drinks market, which is up 6% year-on-year and is now worth just under £50 billion. Booze sales are forecast to reach £60.9 billion in 2026.
So, the Small Producer Relief extends the Small Brewers Relief scheme and now allows businesses producing alcoholic products with an ABV lower than 8.5% to benefit from reduced rates of alcohol duty on qualifying products. This should help them experiment and innovate in new types of drink production, and also benefit from the increased trend towards lower alcohol drinks.
Barry Watts, Head of Policy and Public Affairs, Society of Independent Brewers, said: “[This] is the culmination of five years of consultation on the future of Small Breweries’ Relief – a scheme that has made the huge growth of craft breweries possible over the past twenty years. These changes will finally address the ‘cliff edge’ which was a barrier to small breweries growing and build on the scheme’s success by applying it to other alcoholic products below 8.5%.”
The Brexit Pubs Guarantee
Along with these changes to alcohol duty, the Government has also promised that the price of alcohol in pubs will always be less than retailers – something known as the Brexit Pubs Guarantee.
Prime Minister Rishi Sunak said: “I want to support the drinks and hospitality industries that are helping to grow the economy, and the consumers who enjoy the end result.
“Not only will today’s changes mean that that the price of your pint in the pub is protected, but it will also benefit thousands of businesses across the country.
“We have taken advantage of Brexit to simplify the duty system, to reduce the price of a pint, and to back British pubs.”
We can help you
If you need help with calculating the duty you need to pay for your business, please get in touch with us and we will help you understand what you need to do.