Tag: alcohol duty

CHEERS! Tax cut for 38,000 British pubs

  • Tax paid on pints and other drinks on tap in over 38,000 UK pubs is now up to 11p cheaper than their supermarket equivalents
  • The new Brexit Pubs Guarantee will keep it this way for good
  • Alcohol duty now simplified so drinks are taxed by strength, lowering duty on supermarket shelves for many UK favourites including bottles of pale ale, pre-mixed gin and tonic, and prosecco

Over 38,000 UK pubs and bars have seen a tax cut on the pints they pull from today as the government’s alcohol duty changes take effect.

The duty paid on drinks on tap in pubs will be up to 11p lower than at the supermarket. The changes are designed to help pubs compete on a level playing field with supermarkets, so they can continue to thrive at the heart of communities across the UK. The Brexit Pubs Guarantee announced in the Chancellor’s Spring Budget secures the pledge that pubs will always pay less alcohol duty than supermarkets going forwards.

It comes as other landmark changes to the alcohol duty system also come into effect today, which see drinks taxed by strength for the first time and a new relief – named Small Producer Relief – to help small businesses and start-ups create new drinks, innovate and grow.

Today’s changes have automatically lowered the duty in shops and supermarkets on many of the UK’s favourites including certain bottles of pale ale, pre-mixed gin and tonic, hard seltzer, Irish cream, coffee liquor and English sparkling wine, amongst others.

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.”

Jeremy Hunt, Chancellor of the Exchequer, said: “British pubs are the beating heart of our communities and as they face rising costs, we’re doing all we can to help them out. Through our Brexit Pubs Guarantee, we’re protecting the price of a pint.

“The changes we’re making to the way we tax alcohol catapults us into the 21st century, reflecting the popularity of low alcohol drinks and boosting growth in the sector by supporting small producers financially.”

The three alcohol duty changes that have taken effect today are only possible thanks to the UK’s departure from the EU and the guarantees set out in the Windsor Framework.

The previous duty system was complex and unfair but now that the UK is free to set excise policy to suit its needs, the government has brought about common-sense reforms in order to support wider UK tax and public health objectives.

Brexit Pubs Guarantee

Over 38,000 UK pubs will benefit from lower alcohol tax on the drinks they pour from tap from today. This is because the government has expanded Draught Relief, which effectively freezes or cuts the alcohol duty on the vast majority of these drinks. This is to protect pubs, who are often undercut by supermarket competitors.

It means that the duty they pay on each drink poured from draught, such as pints of beer and cider, will be up to 11p cheaper than in supermarkets. The government has pledged that the duty pubs and bars pay on these drinks will always be less than retailers, known as the Brexit Pubs Guarantee.

This tax reduction is part of a wider shake up of the alcohol duty system which also comes into effect from today – the biggest in 140 years.

A simpler, more modern alcohol duty system

The alcohol duty reforms were announced at the Autumn Budget in 2021. The reforms pledged to modernise and simplify a duty system that had not been changed in 140 years, only possible as 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 15 to 6, 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 will mean that many UK favourites will see duty reductions. Irish cream will drop by 3p, cans of 5% ABV ready-to-drink spirit mixers by 6p, Prosecco by 61p and 500ml 3.4% pale ale by 20p a bottle.

New tax relief to encourage small producers to make new drinks

The UK alcoholic drinks market reached just under £50 billion in 2022, up 6% year on year and is expected to continue to grow – sales are forecast to reach £60.9 billion in 2026. The UK government is laser-focused on continuing this burgeoning success.

The government is introducing Small Producer Relief effective from today, which replaces and extends the previous Small Brewers Relief scheme.

This allows small businesses who produce alcoholic products with an ABV of less than 8.5% to be eligible for reduced rates of alcohol duty on qualifying products.

The new tax relief scheme promotes innovation in the drinks sector, giving small producers the financial freedom to experiment with new types of drink and grow their business. It also supports the modern drinking trend of lower alcohol beverages.

One month to go until Alcohol Duty system changes

Today marks one month until the biggest Alcohol Duty reforms in 140 years come into effect.

On 1 August 2023, the Alcohol Duty system will become much simpler, taxing all alcoholic drinks based on their alcohol by volume (ABV).

This replaces the current Alcohol Duty system, which consists of four separate taxes covering beer, cider, spirits, wine and made-wine.

It will make the system fairer and responsive to new products entering the market as consumer tastes evolve.

Small producers, including pubs and restaurants, will benefit from reduced rates on qualifying products, such as draught beer and cider.

The new system reflects the UK Government’s commitment to tax simplification, helping to foster the right conditions for businesses to prosper and the economy to grow – one of the Prime Minister’s five priorities.

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.”

Jonathan Athow, Director General of Customer Strategy & Tax Design, HMRC, said: “After listening to feedback from industry, economists, consumer organisations, 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.”

The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

These reforms will replace and extend the existing Small Brewers Relief with Small Producer Relief. This means that all small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.

To support the hospitality industry, and recognising the vital role played by pubs in our communities, there will also be a reduced rate for draught products – known as Draught Relief. This will reduce 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.

The reforms will mean that every pint in every pub across the UK will pay less duty than their supermarket equivalent, in line with the UK Government’s Brexit Pubs Guarantee.

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.

To support innovation and responsible drinking, low strength drinks below 3.5% ABV will be charged at a new lower rate of duty. In making these changes, the UK Government aims to encourage product innovation and ensure the Alcohol Duty system works for business and consumers.

More information on the new Alcohol Duty rates and reliefs can be found on GOV.UK.

Those involved in the production of smaller quantities of alcoholic products, can check the reduced rates of duty that apply to them by using the Small Producer Relief calculator. HMRC is also running a series of live webinars throughout July 2023 and in the months ahead to further support the alcohol industry through these changes.

  • More details on changes to Alcohol Duty can be found on GOV.UK
  • The new Alcohol Duty system will tax products by Alcohol By Volume (ABV) per litre of alcohol. Stronger alcoholic products will attract higher duty rates than lower strength products. From 1 August 2023 the new rates are:
Table 1 
Alcoholic strength of alcoholic productRate of duty per litre of alcohol in the product
Less than 1.2%Nil
At least 1.2% but less than 3.5%£9.27
At least 3.5% but less than 8.5%See Table 2
At least 8.5% but not exceeding 22%£28.50
Exceeding 22%£31.64
Table 2 
Description of alcoholic product (of an alcoholic strength of at least 3.5% but less than 8.5%)Rate of duty per litre of alcohol in the product
Still ciderSparkling cider of an alcoholic strength not exceeding 5.5%Spirits, wine, and other fermented productsSparkling cider of an alcoholic strength exceeding 5.5%£9.67
Beer£21.01
Spirits, wine, and other fermented productsSparkling cider of an alcoholic strength exceeding 5.5%£24.77

Wine between 11.5% and 14.5% ABV will be treated as if it is 12.5% ABV for the purposes of calculating the charge to alcohol duty from 1 August 2023 until 1 February 2025.

  • Further details on the new rates can be found on GOV.UK
  • The Small Producer Relief is available to those who produce less than 4,500 hectolitres (hL) of alcohol per year. More detail about this relief can be found here (insert GOV.UK link) GOV.UK
  • Reduced rates for draught products, also known as Draught Relief, will apply to products under 8.5% ABV, packaged in containers of at least 20 litres and which incorporate or are designed to connect to a qualifying dispense system. More detail can be found on GOV.UK
  • A new penalty is being introduced to prohibit decanting alcoholic products subject to reduced rates for draught products – also known as Draught Relief. This aims to reduce misuse of the relief.
  • The temporary wine arrangements, in place for 18 months from 1 August 2023 to 1 February 2025, will treat all wine between 11.5% and 14.5% ABV as if it is 12.5% ABV for the purposes of calculating the alcohol duty. More information on this can be found on GOV.UK
  • Changes to the approval as an alcohol producer and new arrangements for duty returns and payments are scheduled to take effect from late 2024. Further detail on the timing of these changes will be announced at a later date. HMRC intends to provide at least 12 months’ notice so that businesses have time to prepare.
  • The changes to the Alcohol Duty system follows a commitment made at Autumn Budget 2021.
  • Follow HMRC’s Press Office on Twitter @HMRCpressoffice

Alcohol duty freeze extended

  • Alcohol duty freeze extended six months from 1 February to 1 August 2023
  • Part of government’s responsible management of UK economy, plan aims to reassure and provide certainty to pubs, breweries and distilleries facing tough challenges ahead
  • End date aligns with new simpler alcohol tax system taking effect, with Chancellor reserving decision on future duty rates for Spring Budget 2023

The freeze to UK alcohol duty rates has been extended six months to 1 August 2023, the government announced yesterday (19 December 2022).

In a statement to the House of Commons, Exchequer Secretary to the Treasury James Cartlidge laid out a plan designed to provide certainty and reassure pubs, distilleries, and breweries as they face a challenging period ahead.

While new duty rates usually come in on the 1 February each year, Mr Cartlidge set out that this year the duty rates decision will be held until the Chancellor Jeremy Hunt delivers his Spring Budget on the 15 March 2023.

Further, the Minister made clear that if any changes to duty are announced then, they will not take effect until 1 August 2023. This is to align with the date historic reforms for the alcohol duty system come in, and amounts to an effective six month extension to the current duty freeze.

As part of the government’s commitment to responsible management of the UK economy, these changes will provide pubs, breweries, distilleries and other alcohol-related businesses with increased certainty to plan and make investment decisions more effectively.

Exchequer Secretary to the Treasury James Cartlidge said: “Today’s announcement reflects this government’s commitment to responsible management of the UK economy and supporting hospitality through a challenging winter.

“The alcohol sector is vital to our country’s social fabric and supports thousands of jobs – we have listened to pubs, breweries and industry reps concerned about their future as they get ready for the new, simpler, alcohol tax system taking effect from August.

“That’s why we have acted now to give maximum certainty to industry and confirmed there will be just one set of industry-wide changes next summer.”

The current alcohol duty freeze was announced at Autumn Budget 2021, saving consumers over £3 billion over five years. It was expected to come to an end on 1 February 2023, following the Chancellor’s reversal of most of September’s Growth Plan to restore trust in the economy and strengthen public finances.

At Autumn Budget 2021 the government announced the biggest reforms to alcohol duty in 140 years. The changes overhaul the UK’s outdates rules following exiting the EU by radically simplifying the entire system and slashing red-tape. To give industry more time to prepare, September’s Growth Plan set out that the reforms would take effect from 1 August 2023.

The new alcohol tax system will adopt a common-sense approach, where the higher a drink’s strength the higher the duty, whilst new reliefs will be made available to help pubs and small producers thrive.

New Draught Relief will be worth £100 million a year and will ensure smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres.

Small Brewers Relief will be renamed Small Producer Relief, reformed and expanded. Until the revamp, a cliff-edge existed when relief is withdrawn for brewers who make more than 5,000 hectolitres a year.

This will be addressed, there will instead be a gradual taper to the removal of relief, which will empower small breweries to grow, after they had made clear through consultation that the current design was acting as a barrier. Further, the expansion of the relief means that all producers that make drinks below 8.5% – mostly craft brewers and cidermakers – will be able to get relief on their products.

The alcohol duty reforms will help create a simpler, fairer and healthier duty system. Higher rate for sparkling wines will come to an end, meaning they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning a sherry and Irish Cream will now pay the same duty, and super-strength ‘white cider’ will rise to address public health concerns. 

The wine industry will also be supported as they adapt to the new system. All wine between 11.5-14.5% alcohol by volume (ABV) to calculate duty as if it were 12.5% ABV for 18 months from the implementation of the new system.

A UK Spirits Alliance spokesperson said: “Today’s decision by HM Treasury comes as extremely welcome news to distillers across the country. We know that previous duty freezes have enabled distillers across the UK to invest in supply chains, tourism centres and local communities.

“The announcement today is a major boost to the industry at such a crucial time. We look forward to working with the Chancellor over the coming months as he makes a decision on the future of alcohol duty at the Spring Budget.”

Miles Beale, Chief Executive, the Wine and Spirit Trade Association, said: “We are extremely pleased to hear that the Chancellor has listened to our calls not to deliver a double whammy tax hike next year.

“History has shown that freezing alcohol duty delivers increased revenue to the Exchequer. If duty rates went up by RPI on February 1st, this would have been a crippling blow to the UK alcohol industry and consumers who would have to pay the price for tax rises.

“Delaying any increase until 1 August means businesses will not have to manage two duty rises in the space of 6 months.  We hope that any duty increases applied in August take into account the damage suffered by wine and spirit businesses and the hospitality sector during the pandemic as businesses continue to fightback.

“We are calling on Jeremy Hunt to cancel double digit tax rises to help cash-strapped consumers and to support the UK’s world-class drinks industry.”

Emma McClarkin, Chief Executive, the British Beer and Pub Association said: “The decision to extend the freeze on beer duty will be welcomed by pubs and brewers alike.

“In 2022 our industry has faced pressures and challenges like never before. This freeze will allow £180million to be reinvested into our sector at a critical moment and inject a much-needed flurry of festive cheer for pubs and breweries. It shows the Government understands just how much our pubs and brewers mean to communities across the UK.

“Investment in our sector now will pay dividends in villages, towns and cities across the country for generations to come. Pubs and brewers are a crucial thread in the social fabric of our society and contribute not only economically but socially, connecting people in communities up and down the country.

“We look forward to working with the Government to implement the promised duty reforms in 2023 ensuring a fair and modernised rates system in the UK that support lower-strength products and our country’s pubs.”

Richard Naisby, National Chairman, Society of Independent Brewers said: “Independent breweries play a vital role in the British hospitality industry and are embedded in their local communities, providing jobs and adding greatly to local economies across the UK.

“The extension of the beer duty freeze comes as welcome news to these vital independent businesses, providing some certainty until the summer.

“We look forward to working with Treasury on delivering further positive changes for the hospitality and independent brewing industry.”