On the face of it, yesterday’s budget seemed like good news for the drinks industry – especially for sparkling wine producers.

Not only did chancellor Rishi Sunak freeze alcohol duty, he also set out plans to completely overhaul the tax system, including cutting the main duty bands from 15 to 6 and taxing alcohol based on its strength. And he said the duty premium for sparkling wine will be cut to be in line with still wines of equivalent strength.

But as the dust settled, questions began to arise.

A statement from Wine & Spirit Trade Association chief executive Miles Beale welcomed the reduction of the sparkling wine super tax, which he said is “long overdue”. However, he went on to say that while simpler, the proposals for the overhaul of a new alcohol taxation system do not make the regime fairer, which he said was a fundamental aim of the review.

“We are mystified by a proposal that embeds unfairness between products meaning that beer will be taxed between 8p -19p per unit, wine increases to 26p per unit and spirits remains at 29p per unit.”

Matthew O’Connell, director of Bordeaux Index and CEO of LiveTrade also questioned the tax per unit measures.

“It is still difficult to justify the premium per unit applied to wine vs beer – fixing the specific anomaly that people were overtaxed for celebrating with fizz rather overlooks the broader issue that both wine and Champagne should be brought level on a per unit basis with beer,” he said.

The WSTA outlined expected price variations for when the new system is implemented in 2023:

  • Duty on a 750ml bottle of still wine at 12% remains at £2.23 until February 2023, if the new duty rates go ahead duty will go up to £2.33 (+10p) (which goes up to12p on the sales price when you include VAT)
  • Duty on a 750ml bottle of still wine at 15% will remain at £2.33 until Feb 2023 when the duty rate will go up to £2.91 (+68p) (+82p including VAT)
  • Duty on a 750ml bottle of sparkling at 12% remains at £2.86 until Feb 2023 when it will go down to £2.33 (-53p)(-64P inc VAT)
  • Duty on a 750ml bottle of fortified wine at 17% remains at £2.98 until Feb 2023 when it will go up to £3.30 (+32) (+38p inc VAT)
  • Duty on a 70cl bottle of vodka at 37.5% remains at £7.54 and will remain unchanged.
  • Duty on a 70cl bottle of gin at 40% remains at £8.05 and will remain unchanged.

Meanwhile, Liam Manton, co-founder of Didsbury Gin, called the chancellor’s Budget “confusing”.

He said: “It’s good that some industry concessions have been made, but in our opinion doesn’t go far enough. 

“The message we’ve received… is confusing for businesses like ours – and we’re waiting for clarity, but additional tax on high abv drinks will present a real challenge to businesses like ours.”

He pointed out existing high tax rates for spirits, as well as the challenge of competing with large drinks companies.  

“SMEs like ours are the backbone of the British economy and are working tirelessly to innovate within the category whilst competing against large organisations,” he said. “This move from the chancellor could put businesses like ours at a competitive disadvantage in the long run. The chancellor has said they will support craft producers, but it’s not clear yet how.”

It has to be noted, though, that the reform could be good news for beer, cider and low abv producers, as well as some craft producers – even if the details are still emerging. 

The Craft Drinks Co managing director Richard Chamberlain said: “These changes will unquestionably benefit the raft of small craft producers across the UK, which is great for home production, less food miles, more sustainability and supporting businesses in local communities. It will also be a great boost to the UK wine industry that has become world renowned for exceptional sparkling wines.”

He also said further support to smaller producers comes from the chancellor’s announcement that Small Brewers’ Rate Relief is to be extended to other drink producers, such as wine and cider makers. “This will be a big boost to even more home production at a local level, helping to create even more choice for the consumer and more small business employment,” he added. 

And SIBA chief exec James Calder also welcomed the changes. “The chancellor’s Budget introduced radical changes to the outdated Alcohol Duty system which will benefit brewers of lower strength beers, traditional cask beer and create a more level playing field between small breweries and cider producers,” he said. 

There is a consultation on the chancellor’s proposal for a complete overhaul of the UK’s alcohol taxation system, setting out six new steps to simplify the regime. The consultation will close on 30 January 2022. To respond or find out more information, click here