The government’s reformed alcohol duty regime cranks up on August 1, bringing the biggest increases in alcohol tax for five decades, with spirits, still wine and fortified wine among the hardest hit. Drinks industry hopes of a reprieve from the changes evaporated in the summer heat.
The revamp will see the established system of taxing alcoholic drinks by type replaced by one based on abv. It means that higher-strength products will face big increases, while lower strength ones are less adversely affected. A few will even see decreases.
There will be a small producer relief for those making less than 4,500hl of alcohol a year, and relief on draught beer in an attempt to help keep punters in the pubs. But for most brands and their consumers the impact will be harsh.
Spirits at 37.5% abv will see a duty hike of 76p for a bottle, a duty rate increase of around 10%. Still wine at 12.5% abv will go up 44p a bottle from a 20% duty increase, and the Wine & Spirit Trade Association notes that wines from hotter climates which produce naturally higher abvs will face the biggest increases.
The changes include a temporary arrangement in which wines between 11.5% and 14.5% abv will be taxed at an assumed strength of 12.5% abv until 2025. Port and sherry face a 44% duty increase, adding £1.30 to a bottle of port at 20% abv and 97p to sherry at 15%. Hallgarten & Novum Wines is offering the old rates of duty on 148 still wines for those ordering between five and 100 cases during August. The Wine Society said it would absorb increases until October.
Under the new regime, a 44cl can of 4.5% abv beer will go up 4p and cider of the same strength will increase 8p. The British Beer & Pub Association said that the increase on beer, although relatively modest on a per-pack basis, would cost the brewing industry £250 million a year.
Isolated categories to see a benefit will be sparkling wine, where a 12% abv bottle will drop 19p in price, and RTDs, where 5% abv 25cl cans will fall by 5p.
The new system introduces an escalating duty scale across alcohol categories, with the rate increasing at 3.5%, 5.6%, 8.5% and 22% abv, regardless of drink type. It means that producers such as brewers and cidermakers that can successfully reduce abvs to hit lower rates could benefit.
But WSTA chief executive Miles Beale pointed out that this was less practical for wine producers. “Making wine isn’t an industrial process,” he said. “Reducing wine’s alcoholic content is limited, changes the product and is costly to carry out.”